Financial Analyst Characteristics and Herding Behavior in Stock Recommendations

• In Event: Financial Accounting and Reporting 5

Abstract

This study classifies analyst’s stock recommendations as bold, herding and finds that if we delete the firm years with earnings announcement around analyst recommendations in (-2, 4) days window, (1) boldness increase the market return than herding; (2) Then we withhold the firm year observations with earnings announcement around the same window, and we find similar results, but after we divide our sample for bold recommendations into two categories: (1) contra bold; (2) leading bold. We found that (1) leading bold produces the highest market returns both in the short run and in the long run. We find that market believe contra bold stock recommendations if there is earnings announcement around (-1,3) days window around stock recommendations. Also we find evidence from Barron that analysts use Russel 2000 will have more favorable abnormal returns

Authors

• Hua Xin, Rutgers, The State University of New Jersey, Newark

• Dan Palmon, Rutgers, The State University of New Jersey