IDEAS home Printed from https://ideas.repec.org/a/eee/intfor/v39y2023i2p772-790.html
   My bibliography  Save this article

Differing behaviours of forecasters of UK GDP growth

Author

Listed:
  • Meade, Nigel
  • Driver, Ciaran

Abstract

The literature suggests that the dispersion of agents’ forecasts of an event flows from heterogeneity of beliefs and models. Using a data set of fixed event point forecasts of UK GDP growth by a panel of independent forecasters published by HM Treasury, we investigate three questions concerning this dispersion: (a) Are agent’s beliefs randomly distributed or do agents fall into groups with similar beliefs? (b) as agents revise their forecasts, what roles are played by their previous and consensus forecasts? and (c) is an agent’s private information of persistent value? We find that agents fall into four clusters, a large majority, a few pessimists, and two idiosyncratic agents. Our proposed model of forecast revisions shows agents are influenced positively by a change in the consensus forecast and negatively influenced by the previous distance of their forecast from the consensus. We show that the forecasts of a minority of agents significantly lead the consensus.

Suggested Citation

  • Meade, Nigel & Driver, Ciaran, 2023. "Differing behaviours of forecasters of UK GDP growth," International Journal of Forecasting, Elsevier, vol. 39(2), pages 772-790.
    • Handle: RePEc:eee:intfor:v:39:y:2023:i:2:p:772-790
    DOI: 10.1016/j.ijforecast.2022.02.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0169207022000334
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijforecast.2022.02.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Giampiero M. Gallo & Clive W.J. Granger & Yongil Jeon, 2002. "Copycats and Common Swings: The Impact of the Use of Forecasts in Information Sets," IMF Staff Papers, Palgrave Macmillan, vol. 49(1), pages 1-2.
    2. Manuel Amador & Pierre-Olivier Weill, 2010. "Learning from Prices: Public Communication and Welfare," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 866-907.
    3. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1295-1328.
    4. Antonello D’Agostino & Kieran Mcquinn & Karl Whelan, 2012. "Are Some Forecasters Really Better Than Others?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 715-732, June.
    5. George-Marios Angeletos & Zhen Huo & Karthik A. Sastry, 2021. "Imperfect Macroeconomic Expectations: Evidence and Theory," NBER Macroeconomics Annual, University of Chicago Press, vol. 35(1), pages 1-86.
    6. Pierdzioch, Christian & Reid, Monique B. & Gupta, Rangan, 2016. "Inflation forecasts and forecaster herding: Evidence from South African survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 42-50.
    7. Pierdzioch, Christian & Rülke, Jan-Christoph, 2012. "Forecasting stock prices: Do forecasters herd?," Economics Letters, Elsevier, vol. 116(3), pages 326-329.
    8. Clements, Michael P., 2012. "Do professional forecasters pay attention to data releases?," International Journal of Forecasting, Elsevier, vol. 28(2), pages 297-308.
    9. Robert Rich & Joseph Tracy, 2021. "A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(1), pages 233-253, February.
    10. Michael P. Clements, 2015. "Do US Macroeconomic Forecasters Exaggerate their Differences?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 34(8), pages 649-660, December.
    11. Michael B. Clement & Senyo Y. Tse, 2005. "Financial Analyst Characteristics and Herding Behavior in Forecasting," Journal of Finance, American Finance Association, vol. 60(1), pages 307-341, February.
    12. David Hirshleifer & Siew Hong Teoh, 2003. "Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis," European Financial Management, European Financial Management Association, vol. 9(1), pages 25-66, March.
    13. Patton, Andrew J. & Timmermann, Allan, 2010. "Why do forecasters disagree? Lessons from the term structure of cross-sectional dispersion," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 803-820, October.
    14. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
    15. Martin Guzman & Joseph E Stiglitz, 2021. "Pseudo-wealth and Consumption Fluctuations [Emerging market business cycles: the cycle is the trend]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 372-391.
    16. Clements, Michael P., 2019. "Do forecasters target first or later releases of national accounts data?," International Journal of Forecasting, Elsevier, vol. 35(4), pages 1240-1249.
    17. Michael P. Clements, 2018. "Do Macroforecasters Herd?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 265-292, March.
    18. Andrew J. Patton & Allan Timmermann, 2011. "Predictability of Output Growth and Inflation: A Multi-Horizon Survey Approach," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(3), pages 397-410, July.
    19. Frenkel, Michael & Mauch, Matthias & Rülke, Jan-Christoph, 2020. "Do forecasters of major exchange rates herd?," Economic Modelling, Elsevier, vol. 84(C), pages 214-221.
    20. 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, July.
    21. Gianna Boero & Jeremy Smith & Kenneth F. 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, July.
    22. Christian Pierdzioch & Georg Stadtmann, 2011. "Do exchange-rate forecasters herd?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(8), pages 739-741.
    23. Spiro, Peter S., 1989. "Improving a group forecast by removing the conservative bias in its components," International Journal of Forecasting, Elsevier, vol. 5(1), pages 127-131.
    24. Dovern, Jonas, 2013. "When are GDP forecasts updated? Evidence from a large international panel," Economics Letters, Elsevier, vol. 120(3), pages 521-524.
    25. Pierdzioch, Christian & Rülke, Jan Christoph & Stadtmann, Georg, 2010. "New evidence of anti-herding of oil-price forecasters," Energy Economics, Elsevier, vol. 32(6), pages 1456-1459, November.
    26. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    27. Tsuchiya, Yoichi, 2015. "Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 266-276.
    28. Weale, Martin, 2021. "Do Economists Expect Too Much From Expectations?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 255, pages 25-41, February.
    29. Ronald Bewley & Denzil G. Fiebig, 2002. "On the herding instinct of interest rate forecasters," Empirical Economics, Springer, vol. 27(3), pages 403-425.
    30. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2013. "Forecasting metal prices: Do forecasters herd?," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 150-158.
    31. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert Rich & Joseph Tracy, 2021. "A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(1), pages 233-253, February.
    2. Yoichi Tsuchiya, 2021. "Crises, market shocks, and herding behavior in stock price forecasts," Empirical Economics, Springer, vol. 61(2), pages 919-945, August.
    3. Robert W. Rich & Joseph Tracy, 2017. "The behavior of uncertainty and disagreement and their roles in economic prediction: a panel analysis," Staff Reports 808, Federal Reserve Bank of New York.
    4. Clements, Michael P, 2012. "Subjective and Ex Post Forecast Uncertainty : US Inflation and Output Growth," The Warwick Economics Research Paper Series (TWERPS) 995, University of Warwick, Department of Economics.
    5. Michael P Clements, 2014. "Assessing the Evidence of Macro- Forecaster Herding: Forecasts of Inflation and Output Growth," ICMA Centre Discussion Papers in Finance icma-dp2014-12, Henley Business School, University of Reading.
    6. Rülke, Jan-Christoph & Silgoner, Maria & Wörz, Julia, 2016. "Herding behavior of business cycle forecasters," International Journal of Forecasting, Elsevier, vol. 32(1), pages 23-33.
    7. Richard K. Crump & Stefano Eusepi & Emanuel Moench & Bruce Preston, 2021. "The Term Structure of Expectations," Staff Reports 992, Federal Reserve Bank of New York.
    8. Michael P. Clements, 2018. "Do Macroforecasters Herd?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 265-292, March.
    9. Pierdzioch, Christian & Reid, Monique B. & Gupta, Rangan, 2016. "Inflation forecasts and forecaster herding: Evidence from South African survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 42-50.
    10. Krüger, Fabian & Nolte, Ingmar, 2016. "Disagreement versus uncertainty: Evidence from distribution forecasts," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 172-186.
    11. Kajal Lahiri & Huaming Peng & Xuguang Simon Sheng, 2022. "Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity," Advances in Econometrics, in: Essays in Honor of M. Hashem Pesaran: Prediction and Macro Modeling, volume 43, pages 29-50, Emerald Group Publishing Limited.
    12. Andrade, Philippe & Crump, Richard K. & Eusepi, Stefano & Moench, Emanuel, 2016. "Fundamental disagreement," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 106-128.
    13. Levis, Mario & Muradoğlu, Yaz Gulnur & Vasileva, Kristina, 2023. "Herding in foreign direct investment," International Review of Financial Analysis, Elsevier, vol. 86(C).
    14. Goldstein, Nathan & Zilberfarb, Ben-Zion, 2021. "Do forecasters really care about consensus?," Economic Modelling, Elsevier, vol. 100(C).
    15. Yanwei Jia & Jussi Keppo & Ville Satopää, 2023. "Herding in Probabilistic Forecasts," Management Science, INFORMS, vol. 69(5), pages 2713-2732, May.
    16. Nikos Apokoritis & Gabriele Galati & Richhild Moessner & Federica Teppa, 2019. "Inflation expectations anchoring: new insights from micro evidence of a survey at high-frequency and of distributions," BIS Working Papers 809, Bank for International Settlements.
    17. repec:zbw:bofrdp:037 is not listed on IDEAS
    18. Joshua Abel & Robert Rich & Joseph Song & Joseph Tracy, 2016. "The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 533-550, April.
    19. Christoph Buehren & Tim Meyer & Christian Pierdzioch, 2020. "Experimental Evidence on Forecaster (anti-) Herding in Sports Markets," MAGKS Papers on Economics 202038, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    20. Bizer, Kilian & Meub, Lukas & Proeger, Till & Spiwoks, Markus, 2014. "Strategic coordination in forecasting: An experimental study," University of Göttingen Working Papers in Economics 195, University of Goettingen, Department of Economics.
    21. de Mendonça, Helder Ferreira & Vereda, Luciano & Araujo, Mateus de Azevedo, 2022. "What type of information calls the attention of forecasters? Evidence from survey data in an emerging market," Journal of International Money and Finance, Elsevier, vol. 129(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:39:y:2023:i:2:p:772-790. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijforecast .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.