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Estimating fundamental cross-section dispersion from fixed event forecasts

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  • Jonas Dovern

    ()
    (The Kiel Institute for the World Economy (IfW))

  • Ulrich Fritsche

    ()
    (Department for Economics and Politics, University of Hamburg, and DIW Berlin)

Abstract

A couple of recent papers have shifted the focus towards disagreement of professional forecasters. When dealing with survey data that is sampled at a frequency higher than annual and that includes only fixed event forecasts, e.g. expectation of average annual growth rates measures of disagreement across forecasters naturally are distorted by a component that mainly reflects the time varying forecast horizon. We use data from the Survey of Professional Forecasters, which reports both fixed event and fixed horizon forecasts, to evaluate different methods for extracting the ``fundamental'' component of disagreement. Based on the paper's results we suggest two methods to estimate dispersion measures from panels of fixed event forecasts: a moving average transformation of the underlying forecasts and estimation with constant forecast-horizon-effects. Both models are easy to handle and deliver equally well performing results, which show a surprisingly high correlation (up to 0.94) with the true dispersion.

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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_1_2008.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200801.

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Length: 14 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:hep:macppr:200801

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Keywords: survey data; dispersion; disagreement; fixed event forecasts;

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References

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Cited by:
  1. Dovern, Jonas & Fritsche, Ulrich & Slacalek, Jiri, 2009. "Disagreement among forecasters in G7 countries," Working Paper Series 1082, European Central Bank.

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