Analysts Herding Behavior,Information Transmission And Asset Pricing

According to Miller Modigliani valuation formula,the current market value of a listed company should equal to the sum of present value of the distance between expected future profitability and expected future growth in book equity in future periods.Thus,how to predict the future profitability and growth in book equity is a key step to value market value of a company.The forecasts or recommendations reports issued by the analysts with available numerous information resources often have been used by many institutions and retail investors to calculate the market value of a company or as important references.However,many studies in recent years suggest that analysts often exhibit some bias of their behaviors in forecast or recommendation activity.One of most markable bias of their behaviors is herding behaviors.Based on different motivations,we can divide analysts herding behavior into information herding behavior and non-information herding behavior.After making summary and analysis on previous literatures concerned analysts herding behavior,this paper use complex networks theory,Agent-based modelling technology and empirical analysis and some methods to make studies on the analysts' herding behavior in finance forecasting and recommendation activities and their effects on asset price volatility,stock price synchronicity and some variables.In section three,this paper builded analysts herding behavior networks of each industry.Based on these networks,this paper constructed the statistics indicator HBN which can measure the degree of different kinds of analysts herding behaviors.The result suggests that there are quite differences of HBN among all industries.But these differences have not caused the variation of the volatility of industry index return.In section four,this paper constructs an agent-based model which can reflect the information transmission between analysts and institutional investors.According to previous literatures,it is hard to distinguish two kinds of analysts' recommendation herding behaviors and measure them.However,this agent-based model can solve these problems and make studies on formation mechanism of two analysts herding behaviors and effect on stock price volatility from two herding behaviors.The results suggest that the buying or buy recommendation and selling or sell recommendation herding behaviors of institutional investors and analysts make asymmetrical effects on asset price volatility.Specifically,these two analysts herding behaviors cannot set significant effects on the change of asset price volatility.Only buy-herding behaviors of institutional investors can make an influence on asset price volatility,but the sell-herding behaviors.Furthermore,the increasing of analysts' career concern,institutional investors' information collecting ability and so on can make a significant effect on the variation of asset price volatility.When institutional investors have fixed cooperative relationships with some analysts or analysts use more ?short sighted? method to make decisions or there are more analysts with less experience,assets price volatility will increase.In section five,this paper makes an empirical study and finds that the increase of the number of forecasts reports will raise the level of stock price synchronicity significantly when there is no obvious herding behavior among analysts.However,when there is more obvious herding behavior among analysts,analyst forecast coverage has no significant effect on stock price synchronicity.Moreover,the noise of stock price could weaken these influences brought by variables mentioned above.