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.