Analyst Recommendations, Mutual Fund Herding, and Overreaction in Stock Prices

• 成果类型: Article
• 署名作者: Brown, Nerissa C.; Wei, Kelsey D.; Wermers, Russ
• 署名单位: University System of Georgia; Georgia State University; University of Texas System; University of Texas Dallas; University System of Maryland; University of Maryland College Park
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1751
• 发表日期: 2014
• 页码: 1-20
• 关键词: mutual fund herding; Analyst recommendations; return reversals; Managerial myopia

摘要

This paper documents that mutual funds herd (trade together) into stocks with consensus sell-side analyst upgrades, and herd out of stocks with consensus downgrades. This influence of analyst recommendation changes on fund herding is stronger for downgrades, and among managers with greater career concerns. These findings indicate that career-concerned managers are incentivized to follow analyst information, and that managers have a greater tendency to herd on negative stock information, given the greater reputational and litigation risk of holding losing stocks. Furthermore, starting in the mid-1990s (when aggregate mutual fund equity ownership is significantly higher), stocks traded by career-concerned herds of fund managers in response to analyst recommendation changes experience a significant same-quarter price impact, followed by a sharp subsequent price reversal. Our evidence suggests that analyst recommendation revisions induce herding by career-concerned fund managers, and that this type of trading has become price destabilizing with the increasing level of mutual fund ownership of stocks.