Market sentiment and herding in analysts' stock recommendations

摘要

This study examines whether market sentiment affects the herding tendency among analysts. The results indicate that overall analysts tend to herd toward a consensus when issuing recommendations, and this tendency increases with market sentiment. These results are robust with regards to excluding common information and earnings information as well as including reiterations and using a mean consensus measure. Furthermore, the effect of market sentiment on analysts' herding mainly occurs for recommendations on hard-to-value firms, large firms, as well as firms with high institutional ownership, high book-to-market ratio and low coverage by analysts.