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Comparing predictions and outcomes : theory and application to income changes Author info | Abstract | Publisher info | Download info | Related research | Statistics Das, M.
Dominitz, J.
Soest, A. van (Tilburg University, Center for Economic Research)
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Household surveys often elicit respondents' intentions or predictions of future outcomes. The survey questions may ask respondents to choose among a selection of (ordered) response categories. If panel data or repeated cross-sections are available, predictions may be compared with realized outcomes. The categorical nature of the predictions data, however, complicates this comparison. Generalizing previous ndings on binary intentions data, we derive bounds on features of the empirical distribution of realized outcomes under the "best-case" hypothesis that respondents have rational expectations and that reported expectations are best predictions of future outcomes. These bounds are shown to depend on the assumed model of how respondents form their "best prediction" when forced to choose among (ordered) categories. An application to data on income change expectations and realized income changes illustrates how alternative response models may be used to test the best-case hypothesis.
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
45.
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Date of creation: 1997Date of revision:
Handle: RePEc:dgr:kubcen:199745Contact details of provider: Web page: http://center.uvt.nl
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Find related papers by JEL classification: C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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