Abstract
AbstractThis paper examines how analyst recommendations and investors’ herding influence stock returns and trading performance. Different types of investors display distinct herding intensity. Institutional investors herd significantly more than individuals do and investment trusts exhibit the highest herding intensity. Foreign investors tend to herd in buying (selling) stocks when analysts issue better (worse) recommendations. Investment trusts are inclined to herd in the sell side when analysts issue “sell” recommendations. Institutional buy (sell) herding positively (negatively) correlates to current‐day returns. Individual herding shows the exact opposite pattern. Finally, institutional investors’ higher buy intensity has better trading performance following analysts’ buy‐oriented recommendations.
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