Components of Other Comprehensive Income Increase Uncertainty and Reduce Analyst Forecasting Ability

This study examines the relationship between components of OCI and analysts' forecasting behaviour, being forecast accuracy, analyst following and herding. The findings show that cash flow hedge (CFH) and foreign currency (FCX) elements are negatively associated with forecast accuracy and herding. We also find that available for sale (AFS) amounts are positively associated with forecast accuracy, herding and analyst following. Together with prior evidence, our findings provide empirical evidence that some OCI items (CFH and FCX) may increase uncertainty and make it more difficult for analysts to predict net income, and other OCI items (AFS) may be used by management to smooth net income, making net income less volatile and easier to predict. These results suggest that market participants benefit from more transparent OCI disclosures