This paper documents that mutual funds “herd”(trade together) into stocks with consensus
sell-side analyst upgrades, and herd out of stocks with consensus downgrades. This
influence of analyst recommendation changes on fund herding is stronger for downgrades,
and among managers with greater career concerns. These findings indicate that career-
concerned managers are incentivized to follow analyst information, and that managers have
a greater tendency to herd on negative stock information, given the greater reputational and …

Mutual funds are responsible for an increasing share of US equity trading activity, since
funds (whose assets totaled over $4 trillion in 2006) now own over 22 percent of all listed US
equities, and since average annual fund turnover now exceeds 100 percent. This project will
study the trading activity of US mutual funds to determine the impact of fund trading on equity
prices. Specifically, our study focuses on the tendency of funds to simultaneously buy (or
sell) the same stocks at the same time (ie, to" herd"), especially in response to the release of …