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Analyst Herding Behavior and Analyst Affiliation: Evidence from Business Groups

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  • Junghee Lee
  • Jung-wha Lee

Abstract

This paper examines analysts herding behavior when there are two groups of analysts where one group has affiliation with the subject firm and one group does not. We found that the unaffiliated analysts issue the forecasts herding towards their prior affiliated analysts' forecasts. The unaffiliated analysts' herding with affiliated analysts is intensified by positive information delivered by affiliated analysts. In addition, the herding with affiliated analysts results from unaffiliated analysts' strategic actions to maximize forecast accuracy. Overall, when significant information asymmetry exists, the findings suggest that unaffiliated analysts use affiliated analysts' forecasts as a primary information source to forecast earnings.

Suggested Citation

  • Junghee Lee & Jung-wha Lee, 2015. "Analyst Herding Behavior and Analyst Affiliation: Evidence from Business Groups," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 16(4), pages 373-386, October.
    • Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:373-386
    DOI: 10.1080/15427560.2015.1098640
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    Cited by:

    1. Reveley Callum & Shanaev Savva & Bin Yu & Panta Humnath & Ghimire Binam, 2023. "Analyst herding—whether, why, and when? Two new tests for herding detection in target forecast prices," Economics and Business Review, Sciendo, vol. 9(4), pages 25-55, December.
    2. Young‐Soo Choi & Svetlana Mira & Nicholas Taylor, 2022. "Local versus foreign analysts' forecast accuracy: does herding matter?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1143-1188, April.

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