In psychology, “herd mentality” refers to the individual’s proclivity to follow the group rather than their intuition. The same principle can be applied to the stock market. An investor may emulate the trades of others rather than using their judgment. The same can be true concerning stock analysts: an analyst may be more likely to agree with others than disagree. This phenomenon can result in market bubbles when optimism is high, or market panics when optimism is low
Stock analysts evaluate companies and offer their opinions about future trajectories of a given stock price. They consider historical performance, industry growth, management guidance, and other factors to make projections and ratings. Analysts may issue ratings of “Buy,” “Sell,” or “Hold,” for example. Analyst upgrades or downgrades, such as a change from “Hold” to “Buy,” have the potential to move stocks in either direction. It is also important to understand that some analysts carry more respect and weight than others.
What are pre-market and after-hours trading and why are they essential in understanding the markets? The New York Stock Exchange (NYSE) and NASDAQ’s weekday trading window is from 9:30 a.m. to 4:00 p.m. Eastern Time (ET). However, there is much market activity that takes place outside of this window. Pre-market trading, which lends its name to PreMarket Prep, occurs before the market opens, while after-hours trading occurs after the market closes.