Financial forecasts during the crisis: Were experts more accurate than laypeople?
The main goal of this paper was to examine the accuracy and confidence of financial forecasts during the 2009/2010 crisis. The study was carried out in February 2009 in Poland. The participants represented two groups: financial analysts and laypeople (people without knowledge or skills in finance). All participants were asked to forecast future stock market performance and foreign exchange rates. Additionally, they marked their confidence on a 100-point scale. The results showed that the forecasts significantly differed from the real values. In forecasting both the stock market and the currency exchange market, the prediction error significantly differed from zero. Even if the participants were optimistic in making the directional stock market forecasts, they were pessimistic when making point index predictions, which suggests a judgmental paradox. The experts were slightly better than the non-experts in predicting the stock market. However, their accuracy was generally not better in the exchange market forecasts. The next step of the analysis focused on the confidence factor. The results of this part of the research showed that the laypeople were less confident than the experts in all the judgments.
References listed on IDEAS
Please 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.:
- Klayman, Joshua & Soll, Jack B. & Gonzalez-Vallejo, Claudia & Barlas, Sema, 1999. "Overconfidence: It Depends on How, What, and Whom You Ask, , , , , , , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 79(3), pages 216-247, September.
- Sundali, James A. & Atkins, Allen B., 1994. "Expertise in Investment Analysis: Fact or Fiction," Organizational Behavior and Human Decision Processes, Elsevier, vol. 59(2), pages 223-241, August.
- George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
- Markus Glaser & Martin Weber, 2005.
"September 11 and Stock Return Expectations of Individual Investors,"
Review of Finance,
Springer, vol. 9(2), pages 243-279, 06.
- Markus Glaser & Martin Weber, 2005. "September 11 and Stock Return Expectations of Individual Investors," Review of Finance, European Finance Association, vol. 9(2), pages 243-279.
- Glaser, Markus & Weber, Martin, 2003. "September 11 and Stock Return Expectations of Individual Investors," Sonderforschungsbereich 504 Publications 03-17, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, 04.
- Andersson, Patric & Edman, Jan & Ekman, Mattias, 2005. "Predicting the World Cup 2002 in soccer: Performance and confidence of experts and non-experts," International Journal of Forecasting, Elsevier, vol. 21(3), pages 565-576.
- Mills, Terence C. & Pepper, Gordon T., 1999. "Assessing the forecasters: an analysis of the forecasting records of the Treasury, the London Business School and the National Institute," International Journal of Forecasting, Elsevier, vol. 15(3), pages 247-257, July.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
- Aukutsionek, Sergei P. & Belianin, Alexis V., 2001. "Quality of forecasts and business performance: A survey study of Russian managers," Journal of Economic Psychology, Elsevier, vol. 22(5), pages 661-692, October.
- Shanteau, James, 1992. "Competence in experts: The role of task characteristics," Organizational Behavior and Human Decision Processes, Elsevier, vol. 53(2), pages 252-266, November.
- Onkal, Dilek & Muradoglu, Gulnur, 1994. "Evaluating probabilistic forecasts of stock prices in a developing stock market," European Journal of Operational Research, Elsevier, vol. 74(2), pages 350-358, April.
- Keren, Gideon, 1987. "Facing uncertainty in the game of bridge: A calibration study," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(1), pages 98-114, February.
- Yates, J. Frank & McDaniel, Linda S. & Brown, Eric S., 1991. "Probabilistic forecasts of stock prices and earnings: The hazards of nascent expertise," Organizational Behavior and Human Decision Processes, Elsevier, vol. 49(1), pages 60-79, June.
- Onkal, Dilek & Yates, J. Frank & Simga-Mugan, Can & Oztin, Sule, 2003. "Professional vs. amateur judgment accuracy: The case of foreign exchange rates," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(2), pages 169-185, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:32:y:2011:i:3:p:384-390. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.