Overreaction through anchoring

Quarterly-frequency macroeconomic expectations among professional forecasters robustly exhibit overreactions at the forecaster level. Much of the literature has interpreted this as unambiguous evidence that forecasters place uniformly too much weight on new information. However, we document that forecasters partially offset their quarterly revisions within the calendar year. We then propose a model of annual anchoring in which forecasters reshuffle quarterly predictions to become consistent with annual predictions. We estimate our model to fit survey expectations and show that it provides a unified explanation for the above empirical facts. This suggests a more limited role for uniform overreactions to new information.