The Impact Of Analyst's Herding Behavior On Stock Price Synchronicity

Generally speaking,the trend of stock price is determined by the amount of information contained in the market.A reasonable stock price can meet the company's resource allocation needs and help the company achieve long-term development.The slump of stock market in 2007 and the nose dive boom of stock price in 2015,which together led to the stock price crash and caused serious losses to companies and investors,and also brought severe challenges to the regulatory authorities.Stock price synchronicity refers to the correlation between individual price volatility and market average price volatility,the fundamental reason for the high stock price synchronicity is the low level of trait information about the company level.High stock price synchronization weakens the difference between high-quality companies and inferior companies,stock prices cannot truly reflect the true value of the company,and resources cannot be reasonably fully utilized.Besides,the high stock price synchronization makes the individual price fluctuation of the company vulnerable to the emotions of the whole market,which increases the risk of the company's stock price collapse.Therefore,many scholars have carried out a deeper discussion on the factors which affect the stock price synchronization and on the reasons for its formation.With the rapid development of China's financial industry,various securities companies have set up research departments and significantly expanded the scale of company's research teams,so more and more financial practitioners have transferred to research departments.However,the requirements for the quality of analysts and the assessment mechanism have not kept pace with the development of the industry.Listed companies and analysts released false positive news,arbitrarily raised stock prices,the analysts herding behavior has become increasingly prominent.Herding behavior refers to the phenomenon in which an individual's behavior changes in a direction consistent with the majority when subjected to real or imagined group pressure;in the field of economics,the market participants' herding behavior poses a major challenge to the "economic man" hypothesis.At present,domestic research on herding behavior is mainly concentrated in the field of institutional investors and individual investors,and research on the analysts is still scarce.As an important information intermediary,the analysts play an important role in improving the asymmetry of the company's information environment.However,the current research on the impact of the analysts' herding behavior on the company's stock price synchronicity is still scarce.Therefore,this paper takes the listed companies' 2010-2017 EPS forecast from the analysts as the main research object,constructs the analyst's herding behavior index and stock price synchronization index,and studies the relationship between the analyst's herding behavior and the stock price synchronization,the authenticity of the analyst's herding behavior and the mechanisms behind it.The empirical results show that the analyst's herding behavior is a kind of ?non-information-driven? behavior,this kind of behavior hinders analysts from effectively exerting their market information mediation function,reducing the content of trait information in the market,thus increasing the company's stock price synchronicity,and this relationship is more significant in the bear period.The conflicts interest between analysts and institution investors can exacerbate the impact of the analysts herding behavior on the stock price synchronicity.The main innovations of this paper are as follows: 1)Research content: This paper analyzes its impact on stock price synchronicity from the perspective of the analysts' herding behavior,while the previous literature focused on the internal characteristics of the company(especially from the financial characteristics);2)Research object: This paper focuses on the herding behavior of the analysts,while the previous herding behavior research focused on institutional investors and individuals investors;3)Indicator construction: In the process of constructing the herding index,this paper adds the process of dynamic correction and optimization prediction,previous research mainly used static indicators,and did not take dynamic correction process into account.According to the theoretical analysis and empirical test results,this paper makes some recommendations,which mainly includes:1)increasing the shareholding ratio of value-based institutional investors and establishing corresponding departments within the company to supervise the timeliness accuracy and effectiveness of information disclosure;2)diversifying the analysts' evaluation mechanism,improving the analyst's entry threshold;3)paying continuous attention to the education of the analysts and the investor's investment risk awareness.From macro view,in-depth discussions of the causes of the analysts' herding behavior and the influence of the analysts' herding behavior on the company's stock price synchronization are important for improving the information transfer efficiency and market resource allocation efficiency.From micro view,this paper is conductive to a reasonable reflection of the company's true value,helpful to reduce the risk of stock price crash,and it promotes the company's healthy development.