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Alternative Procedures for Converting Qualitative Response Data to Quantitative Expectations: An Application to Australian Manufacturing

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  • Smith, Jeremy
  • McAleer, Michael

Abstract

This paper analyses and extends alternative procedures for converting qualitative expectations responses to quantitative expectations. A number of conversion procedures is investigated, including the probability model, the time-varying parameter probability model, and the regression approach. The informational content of the survey expectations is compared with simple time series models. It is found that the expectations models are superior for many series, both in terms of producing lower forecast root mean square error (RMSE) values and in detecting turning points in the actual data. Survey expectations are also tested for rational expectations in aggregate using the orthogonality test. Copyright 1995 by John Wiley & Sons, Ltd.

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  • Smith, Jeremy & McAleer, Michael, 1995. "Alternative Procedures for Converting Qualitative Response Data to Quantitative Expectations: An Application to Australian Manufacturing," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 165-185, April-Jun.
    • Handle: RePEc:jae:japmet:v:10:y:1995:i:2:p:165-85
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