Faculty Publications - College of Business

Document Type

Article

Publication Date

1-2024

Abstract

We investigate the role of investor sentiment in institutional herding behavior and its impact on stock prices. We find that institutional investors exhibit more herding behavior during periods of high sentiment, which has a significant impact on stock prices. Our results show that herding has a stabilizing effect on the stock market when investor sentiment is low, while it causes price distortions when sentiment is high. We also show that the impact of sentiment on price is particularly pronounced for small, non-profitable, low tangibility, high-growth firms.

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Originally published in the Journal of Finance Markets, January 2024

https://doi.org/10.1016/j.finmar.2024.100891

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