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Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk


  • Gürkaynak, Refet S.
  • Wolfers, Justin


September 2002, a new market in 'Economic Derivatives' was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioural anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market.

Suggested Citation

  • Gürkaynak, Refet S. & Wolfers, Justin, 2006. "Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk," CEPR Discussion Papers 5466, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5466

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    References listed on IDEAS

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    Cited by:

    1. Markku Lanne, 2009. "Properties of Market-Based and Survey Macroeconomic Forecasts for Different Data Releases," Economics Bulletin, AccessEcon, vol. 29(3), pages 2231-2240.
    2. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2013. "Prediction Markets for Economic Forecasting," Handbook of Economic Forecasting, Elsevier.
    3. Dilger, Alexander, 2016. "Bedingte Aktiengeschäfte," Discussion Papers of the Institute for Organisational Economics 08/2016, University of Münster, Institute for Organisational Economics.
    4. Refet S. Gürkaynak & Jonathan H. Wright, 2013. "Identification and Inference Using Event Studies," Manchester School, University of Manchester, vol. 81, pages 48-65, September.
    5. Halil Ibrahim Aydin & Ahmet Degerli & Pinar Ozlu, 2010. "Recovering Risk-Neutral Densities from Exchange Rate Options: Evidence in Turkey (Kur Opsiyonlarindan Riske Duyarsiz Yogunluk Fonksiyonu Cikarimi: Turkiye Ornegi)," Working Papers 1003, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Justin Wolfers & Eric Zitzewitz, 2006. "Prediction Markets in Theory and Practice," NBER Working Papers 12083, National Bureau of Economic Research, Inc.
    7. Alessandro Beber & Michael W. Brandt, 2009. "Resolving Macroeconomic Uncertainty in Stock and Bond Markets," Review of Finance, European Finance Association, vol. 13(1), pages 1-45.
    8. Parker, John, 2007. "The Impact Of Economic News On Financial Markets," MPRA Paper 2675, University Library of Munich, Germany.
    9. Lanne, Markku, 2007. "The Properties of Market-Based and Survey Forecasts for Different Data Releases," MPRA Paper 3877, University Library of Munich, Germany.
    10. Blaise Gadanecz & Richhild Moessner & Christian Upper, 2007. "Economic derivatives," BIS Quarterly Review, Bank for International Settlements, March.
    11. Kjellberg, David, 2006. "Measuring Expectations," Working Paper Series 2006:9, Uppsala University, Department of Economics.
    12. Linda S. Goldberg & Christian Grisse, 2013. "Time Variation in Asset Price Responses to Macro Announcements," NBER Working Papers 19523, National Bureau of Economic Research, Inc.
    13. Ahmadov, Vugar & Huseynov, Salman & Mammadov, Fuad & Karimli, Tural, 2015. "Brent nefti opsiyonlarından neytral riskli ehtimal paylanmasının əldə olunması
      [Extracting risk-neutral probability distribution from Brent oil options]
      ," MPRA Paper 65704, University Library of Munich, Germany.
    14. Raj Aggarwal & Brian M. Lucey & Fergal A. O'Connor, 2014. "Rationality in Precious Metals Forward Markets: Evidence of Behavioural Deviations in the Gold Markets," The Institute for International Integration Studies Discussion Paper Series iiisdp462, IIIS.
    15. Roberto Rigobon & Brian Sack, 2008. "Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," NBER Chapters,in: Asset Prices and Monetary Policy, pages 335-370 National Bureau of Economic Research, Inc.
    16. Dungey, Mardi & McKenzie, Michael & Smith, L. Vanessa, 2009. "Empirical evidence on jumps in the term structure of the US Treasury Market," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 430-445, June.
    17. Rochelle M. Edge & Refet S. Gurkaynak, 2010. "How Useful Are Estimated DSGE Model Forecasts for Central Bankers?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(2 (Fall)), pages 209-259.
    18. Justin Wolfers, 2006. "New uses for new macro derivatives," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug25.
    19. Juan Pi??eiro Chousa, & Artur Tamazian, & Davit N. Melikyan,, 2008. "MARKET RISK DYNAMICS AND COMPETITIVENESS AFTER THE EURO: Evidence from EMU Members," William Davidson Institute Working Papers Series wp916, William Davidson Institute at the University of Michigan.
    20. Jonsson, Thomas & Österholm, Pär, 2011. "The forecasting properties of survey-based wage-growth expectations," Economics Letters, Elsevier, vol. 113(3), pages 276-281.
    21. Christine Fay & Toni Gravelle, 2010. "Has the Inclusion of Forward-Looking Statements in Monetary Policy Communications Made the Bank of Canada More Transparent?," Discussion Papers 10-15, Bank of Canada.

    More about this item


    density forecasts; disagreement; economic derivatives; expectations; forecasting; macroeconomic surveys; prediction markets; surveys; uncertainty;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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