Professional Forecasts of Interest Rates and Exchange Rates: Evidence from the Wall Street Journal's Panel of Economists
AbstractRecent work on expectations suggests that professional forecasters may have incentives that lead them to make more extreme forecasts than they would make were accuracy the only criterion. We use the interest rate and exchange rate forecasts from the Wall Street Journal?s panel of economists to investigate this issue. We examine the unbiasedness and forecast accuracy of individual forecasters, finding that several forecasters produce biased forecasts and most forecasters cannot out-predict a random walk model. Our tests show evidence of systematic heterogeneity across forecasters and are consistent with independent forecasters making more radical predictions than forecasters from financial institutions.
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Bibliographic InfoPaper provided by North Carolina State University, Department of Economics in its series Working Paper Series with number 004.
Length: 41 pages
Date of creation: Oct 2004
Date of revision:
evaluation of forecasts; financial market forecasting; rationality; incentives;
Other versions of this item:
- Mitchell, Karlyn & Pearce, Douglas K., 2007. "Professional forecasts of interest rates and exchange rates: Evidence from the Wall Street Journal's panel of economists," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 840-854, December.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ECM-2004-11-07 (Econometrics)
- NEP-IFN-2004-11-07 (International Finance)
- NEP-MON-2004-12-21 (Monetary Economics)
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