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Predicting the Signs of Forecast Errors

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Abstract

The signs of forecast errors can be predicted using the difference between individuals' forecasts and the average of earlier forecasts of the same variable. It is possible to improve forecasts without worsening any. It is difficult to reconcile this result with the rational expectations hypothesis, because the average of earlier forecasts is in the information set of the forecasters

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 135.

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Length: 27 pages
Date of creation: 24 Nov 2008
Date of revision: 24 Nov 2008
Handle: RePEc:rtv:ceisrp:135

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Keywords: Rational Expectations; Panel; Loss Function; Forecast; Interest Rate.;

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  1. 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.
  2. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2008. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 122-157, 03.
  3. Steven P. Peterson, 2001. "Rational Bias In Yield Curve Forecasts," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 457-464, August.
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  1. I am storing pdf's at google sites so you can see my research
    by Robert in Robert's Stochastic Thoughts on 2009-03-16 11:09:00
  2. Photographing Phantom Invisible Bond Vigilantes
    by Robert in angry bear on 2009-11-22 13:02:00
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Cited by:
  1. Bergmeir, Christoph & Costantini, Mauro & Benítez, José M., 2014. "On the usefulness of cross-validation for directional forecast evaluation," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 132-143.

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