Does herding behavior affect analysts’ earnings forecasts? A Study of French Listed Firms

Abstract

This paper examines factors that seem to influence analysts’ forecasts accuracy over the period 1996-2000. We aim to identify superior analysts in terms of forecasting accuracy. First, our analyses show that more accurate analysts are not more experienced nor have a fewer number of firms followed. However more accurate analysts work for larger brokerage houses, issue shorter forecast horizon. Furthermore, analysts who distort their own information and tend to herd provide biased forecasts. Then, we investigate whether analyst experience and /or brokerage’s size attenuate the positive association between herding behaviour and forecast errors. We predict that more experienced and employed by larger brokerages have less incentives to herd. We find a negative and significant association between herding-related-errors and analysts’ experience, but we fail to find evidence of the reduction in the association between herding and forecasts errors as brokerage size increases.