Abstract
The primary aim of this study is to carry out an investigation into the effects of analysts’ herding on different types of traders in Taiwan stock market. Our empirical results reveal that smaller traders are more readily affected by analyst herding, essentially as a result of their lack of experience and their lack of access to relevant information sources, which leads to them reacting directly to the central point of the recommendations made by the analysts. Our findings also reveal that both small and large traders are affected by analyst herding in the recommendations provided by the analysts relating specifically to buying. As for the evidence on analyst herding in recommendations relating to selling, larger traders are invariably found to have made use of their informational advantages to act in advance of such recommendations.
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Notes
Given that the trade files obtained from the TSE are categorized under buy and sell, we can skip the step involving the use of the Lee and Ready (1991) algorithm to determine whether each trade is a buyer-or seller-initiated transaction. Consequently, we can effectively eliminate the performance errors that are inherent in the Lee and Ready (1991) methodology.
Mikhail et al. (2007) used only \(d=2\) to calculate the abnormal volumeof traders.
Although not reported here, the results are available from the author upon request.
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Chen, PJ. The Effects of Analysts’ Herding on Traders: Evidence from the Taiwan Stock Market. Asia-Pac Financ Markets 23, 203–227 (2016). https://doi.org/10.1007/s10690-016-9216-8
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DOI: https://doi.org/10.1007/s10690-016-9216-8