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Investor Herding and Price Informativeness in Global Markets: Evidence from Earnings Announcements

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  • Tao Chen
  • Robert K. Larson
  • Han Mo

Abstract

The authors examine whether herd activity promotes the efficient pricing of value-relevant information conveyed by annual earnings announcements. Using a global panel sample representing 35 countries, they find that price informativeness increases with herding effects around the time of the earnings disclosure. In addition, the positive herding-informativeness relationship is greater in countries with stronger legal systems and stronger political regimes. A series of robustness tests confirm these relationships. The study findings demonstrate that the tendency to herd plays a beneficial role in expediting information dissemination and reducing trader disagreement. This implies that this positive association is probably driven by the presence of investigative herding.

Suggested Citation

  • Tao Chen & Robert K. Larson & Han Mo, 2024. "Investor Herding and Price Informativeness in Global Markets: Evidence from Earnings Announcements," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 25(1), pages 92-110, January.
    • Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:92-110
    DOI: 10.1080/15427560.2022.2100380
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