Research On The Impact Of Analyst Follow-up On The Herd Behavior Of Institutional Investors In China

With the rising demand for the allocation of financial assets by residents' wealth,analyst groups and institutional investors,as the two major supporting forces for the healthy and stable development of China's financial market,have received more attention from the entire market.However,institutional investors also have irrational behaviors.What kind of influence the analyst group,as a representative of the rational forces of the market,will have on institutional investors is worthy of further investigation.Herd effect,as the most typical existence of irrational behavior,has been widely studied,but there is an argue among researchers in the existence or not of each market.Therefore,the first part of this article is to reveal whether there is a herd effect on the heterogeneous institutional investors in China and the trend of the herd effect in different time periods through a modified LSV model.The second is to explore how the follow-up of analysts can influence herd of institutional investors in China.The main findings of the research in this article are as follows.First,during the sample period(from the first quarter of 2014 to the fourth quarter of 2018),institutional investors have a herd effect of seasonal fluctuations.From the perspective of data only,compared with the herd effect of public funds,the size of other institutional investors is small,but it is still more obvious than the herd behavior of developed securities markets.In addition,we find that although the herd effect is related to other informational variables,such as stock volatility or returns,while at the same time,institutional investors generally follow the signals released by analysts and have a certain consensus on buying or selling investment stocks,and the different follow-up factors of analysts will affect the consistency of the institutional investor's trading direction to varying degrees.From the impact of passive analyst follow-up,that is,the number of analysts who analyze individual stocks will reduce the herd effect of institutional investors;and the number of analyst ratings and corresponding rating reports generated by analysts 'active behavior will exacerbate the herd effect of institutional investors.Overall,our research found that analyst follow-up plays an important role in institutional investor herd behavior.