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Reporting biases and survey results - evidence from European professional forecasters

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Author Info
Juan Angel García () (Capital Markets and Financial Structure Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Andrés Manzanares () (Risk Management Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Abstract

Using data from the ECB's Survey of Professional Forecasters, we investigate the reporting practices of survey participants by comparing their point predictions and the mean/median/mode of their probability forecasts. We find that the individual point predictions, on average, tend to be biased towards favourable outcomes: they suggest too high growth and too low inflation rates. Most importantly, for each survey round, the aggregate survey results based on the average of the individual point predictions are also biased. These findings cast doubt on combined survey measures that average individual point predictions. Survey results based on probability forecasts are more reliable. JEL Classification: C42, E31, E47.

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Paper provided by European Central Bank in its series Working Paper Series with number 836.

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Length: 32 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:ecb:ecbwps:20070836

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Related research
Keywords: Point estimates; subjective probability distributions; Survey of Professional Forecasters (SPF); survey methods.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "The strategy of professional forecasting," Journal of Financial Economics, Elsevier, vol. 81(2), pages 441-466, August. [Downloadable!] (restricted)
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  2. Gianna Boero & Jeremy Smith & KennethF. Wallis, 2008. "Uncertainty and Disagreement in Economic Prediction: The Bank of England Survey of External Forecasters," Economic Journal, Royal Economic Society, vol. 118(530), pages 1107-1127, 07. [Downloadable!] (restricted)
    Other versions:
  3. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February. [Downloadable!] (restricted)
  4. Patton, Andrew J. & Timmermann, Allan, 2007. "Testing Forecast Optimality Under Unknown Loss," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 1172-1184, December. [Downloadable!] (restricted)
  5. Joseph Engelberg & Charles F. Manski & Jared Williams, 2006. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," NBER Working Papers 11978, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May. [Downloadable!] (restricted)
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  7. Lahiri, Kajal & Teigland, Christie & Zaporowski, Mark, 1988. "Interest Rates and the Subjective Probability Distribution of Inflation Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 233-48, May. [Downloadable!] (restricted)
  8. Robert Rich & Joseph Tracy, 2006. "The relationship between expected inflation, disagreement, and uncertainty: evidence from matched point and density forecasts," Staff Reports 253, Federal Reserve Bank of New York. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Clements, Michael P., 2008. "Explanations of the inconsistencies in survey respondents'forecasts," The Warwick Economics Research Paper Series (TWERPS) 870, University of Warwick, Department of Economics. [Downloadable!]
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