Analyst Target Price Revisions and Institutional Herding

We document that institutional herding behavior is associated with analyst target price revisions even after controlling for the effects of analyst recommendations and earnings forecasts, and provide insights into the price impact of institutional herding. Institutional investors tend to buy the same stocks following an upward target price revision and sell the same stocks following a downward price revision. Moreover, institutional investors tend to overreact to analysts’ target price revisions, which exacerbates the mispricing in the stock market. Such price destabilizing effect is particularly pronounced for herding among investment firms