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Analyst herding and firm-level investor sentiment

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  • John Garcia

    (University of North Texas)

Abstract

This study examines the effect of firm-level investor sentiment derived from news articles and Twitter media content on analyst herding. The results indicate improvements (deterioration) in investor sentiment derived from news and Twitter media content lead to an increase (decrease) in analyst herding. This effect is primarily driven by media content with positive sentiment, and the effect size is magnified when the news and Twitter media content share the same sentiment polarity. Finally, the effect of firm-level investor sentiment on analyst herding is most pronounced in firms with low valuation uncertainty. By establishing a link between firm-level investor sentiment derived from news and Twitter content and analyst herding, this paper shows that analyst herding is amplified by firm-level investor sentiment, and the effect is more pronounced for firms with low valuation uncertainty.

Suggested Citation

  • John Garcia, 2021. "Analyst herding and firm-level investor sentiment," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 461-494, December.
    • Handle: RePEc:kap:fmktpm:v:35:y:2021:i:4:d:10.1007_s11408-021-00382-8
    DOI: 10.1007/s11408-021-00382-8
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    1. Muskan Sachdeva & Ritu Lehal & Sanjay Gupta & Aashish Garg, 2021. "What make investors herd while investing in the Indian stock market? A hybrid approach," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(1), pages 19-37, September.

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    More about this item

    Keywords

    Financial analysts; Investor sentiment; Behavioral finance; Market efficiency;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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