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Predicting the signs of forecast errors

  • Nazaria Solferino

    (University of Rome 'Tor Vergata', Rome, Italy)

  • Robert Waldmann

    (University of Rome 'Tor Vergata', Rome, Italy)

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 forecasters. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1139
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 29 (2010)
Issue (Month): 5 ()
Pages: 476-485

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Handle: RePEc:jof:jforec:v:29:y:2010:i:5:p:476-485
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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  1. 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.
  2. 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.
  3. 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.
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