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Inefficient Use of Competitors'Forecasts?

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  • Reslow, André

    (Uppsala University and Sveriges Riksbank)

Abstract

This paper assesses to what extent forecasters make efficient use of competitors' forecasts. Using a panel of forecasters, I find that forecasters underuse information from their competitors in their forecasts for current and next year's annual GDP growth and inflation. The results also show that forecasters increase the attention to their competitors as the forecast horizon decreases. In a model of noisy information with fixed target forecasts, I confirm the empirical results of underuse of competitors' information. I also extend the model to include a revision cost and show how this can explain the observed inefficiency and observed horizon dynamics. Using the same model framework, I also rule out overconfidence as the main explanation of the observed behavior.

Suggested Citation

  • Reslow, André, 2019. "Inefficient Use of Competitors'Forecasts?," Working Paper Series 380, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0380
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    More about this item

    Keywords

    Forecast Behavior; Efficient; Revision Cost; Forecast Smoothing; Overconfidence;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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