Predicting the Signs of Forecast Errors
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 forecastersDownload Info
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Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 135.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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Related research
Keywords: Rational Expectations; Panel; Loss Function; Forecast; Interest Rate.;Other versions of this item:
- Nazaria Solferino & Robert Waldmann, 2010. "Predicting the signs of forecast errors," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(5), pages 476-485.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- 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-ALL-2008-12-01 (All new papers)
- NEP-ECM-2008-12-01 (Econometrics)
- NEP-FOR-2008-12-01 (Forecasting)
- NEP-MAC-2008-12-01 (Macroeconomics)
References
References listed on IDEASPlease 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.:
- repec:bla:restud:v:72:y:2005:i:4:p:1107-1125 is not listed on IDEAS
- Graham Elliott & Ivana Komunjer & Allan Timmermann, 2005.
"Biases In Macroeconomic Forecasts: Irrationality Or Asymmetric Loss?,"
CAMA Working Papers
2005-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- 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.
- Allan Timmermann & Graham Elliott & Ivana Komunjer, 2004. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Econometric Society 2004 North American Summer Meetings 601, Econometric Society.
- 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.
- 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.
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