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Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test

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  • Dieter Hess
  • Sebastian Orbe

Abstract

Recent findings indicate that macroeconomic survey forecasts are anchoring biased and therefore are inefficient. However, despite highly significant test coefficients, a bias adjustment does not improve forecasts' quality. We find that the cognitive bias is a statistical artifact because the anchoring test is biased itself. In particular, it produces misleading results if macroeconomic analysts use more comprehensive information than assumed by the test. Our results have important implications for a wide range of empirical research relying on survey data to capture market participants' expectations, for example, studies analyzing the impact of macroeconomic conditions on asset prices, equity risk premiums, or market liquidity. Copyright 2013, Oxford University Press.

Suggested Citation

  • Dieter Hess & Sebastian Orbe, 2013. "Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test," Review of Finance, European Finance Association, vol. 17(6), pages 2097-2131.
    • Handle: RePEc:oup:revfin:v:17:y:2013:i:6:p:2097-2131
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    File URL: http://hdl.handle.net/10.1093/rof/rfs037
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    Cited by:

    1. Meub, Lukas & Proeger, Till, 2016. "Are groups 'less behavioral'? The case of anchoring," University of Göttingen Working Papers in Economics 188 [rev.], University of Goettingen, Department of Economics.
    2. Chang, Andrew C. & Hanson, Tyler J., 2016. "The accuracy of forecasts prepared for the Federal Open Market Committee," Journal of Economics and Business, Elsevier, vol. 83(C), pages 23-43.
    3. Rybacki Jakub, 2020. "Macroeconomic forecasting in Poland: The role of forecasting competitions," Central European Economic Journal, Sciendo, vol. 7(54), pages 1-11, January.
    4. Guimarães, Rodrigo, 2014. "Expectations, risk premia and information spanning in dynamic term structure model estimation," Bank of England working papers 489, Bank of England.
    5. Long, Huaigang & Zaremba, Adam & Zhou, Wenyu & Bouri, Elie, 2022. "Macroeconomics matter: Leading economic indicators and the cross-section of global stock returns," Journal of Financial Markets, Elsevier, vol. 61(C).
    6. Ederington, Louis & Guan, Wei & Yang, Lisa (Zongfei), 2019. "The impact of the U.S. employment report on exchange rates," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 257-267.
    7. Meub, Lukas & Proeger, Till, 2014. "Are groups 'less behavioral'? The case of anchoring," University of Göttingen Working Papers in Economics 188, University of Goettingen, Department of Economics.
    8. John B. Broughton & Bento J. Lobo, 2018. "Herding and anchoring in macroeconomic forecasts: the case of the PMI," Empirical Economics, Springer, vol. 55(3), pages 1337-1355, November.
    9. Lukas Meub & Till Proeger, 2018. "Are groups ‘less behavioral’? The case of anchoring," Theory and Decision, Springer, vol. 85(2), pages 117-150, August.
    10. Meub, Lukas & Proeger, Till & Bizer, Kilian, 2013. "Anchoring: A valid explanation for biased forecasts when rational predictions are easily accessible and well incentivized?," University of Göttingen Working Papers in Economics 166, University of Goettingen, Department of Economics.
    11. Manel Gharbi & Anis Jarboui, 2023. "Ownership Structure, Board Characteristics, and Firm Diversification: Evidence from an Emerging Country," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 3-20.
    12. Birz, Gene, 2017. "Stale economic news, media and the stock market," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 87-102.
    13. Imane El Ouadghiri & Remzi Uctum, 2020. "Macroeconomic expectations and time varying heterogeneity:evidence from individual survey data," Applied Economics, Taylor & Francis Journals, vol. 52(23), pages 2443-2459, May.
    14. Meub, Lukas & Proeger, Till, 2014. "An experimental study on social anchoring," University of Göttingen Working Papers in Economics 196, University of Goettingen, Department of Economics.
    15. Chen Gu & Alexander Kurov, 2018. "What drives informed trading before public releases? Evidence from natural gas inventory announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(9), pages 1079-1096, September.

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