Essays on analysts’ forecast behaviour and ESG influences on financial markets

This thesis consists of three essays on analysts’ behaviour and ESG influences on financial markets. Chapter 2 examines how past sentiment, represented by signed forecast errors, influences future forecasts made by analysts. I find that analysts’ signed forecast errors exhibit persistence over time. This relationship is further shaped by historical forecast patterns and market conditions. These findings offer new insights into how analysts’ historical behaviour can predict future forecasts and help explain forecast inefficiencies, providing valuable implications for investors and analysts. Chapter 3 explores how climate change conferences, as exogenous shocks to climate policy, influence analysts’ earnings forecasts for firms. The findings suggest that analysts tend to revise their forecasts upward for green firms after these conferences, reflecting optimism driven by the alignment of firm practices with climate policy goals. This research contributes to understanding how climate-related events shape market expectations, offering new insights into the dynamic relationship between ESG information and analysts’ forecasts. Chapter 4 examines the role of ESG scores in market reactions to analysts’ forecast revisions. I find that higher environmental scores lead to stronger market reactions when analysts revise forecasts downward. This suggests that ESG ratings amplify market responses to negative earnings-related news. The study also finds that this effect is driven by increased investor attention and more accurate forecasts for high ESG-rated firms. The study reveals how ESG factors influence both analysts’ forecasts and market reactions, offering valuable insights into how ESG shapes investor behaviour and financial decision-making.