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Do production managers predict turning points? A directional analysis

Yoichi Tsuchiya

Economic Modelling, 2016, vol. 58, issue C, 1-8

Abstract: This study evaluates the directional accuracy of production managers' forecasts by using a new market-timing test. By extending the directional analysis to the 4×4 case, this study investigates whether Japanese production managers' forecasts correctly predict turning points in production across different industries. This fills a gap in the literature that focused on predicting increase/decrease or acceleration/deceleration using directional analysis of the 2×2 case. It also illustrates its merit over the 2×2 case. This study shows that majority of the forecasts are not useful in predicting turning points in production; however, they are useful in predicting increase/decrease in production. Our findings suggest that the production managers' forecasts serve as early qualitative information of expansion and contraction on the Japanese economy and their accuracy does not differ by phases of business cycles.

Keywords: Directional analysis; Multi-horizon forecast; Forecast evaluation; Market-timing test (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:1-8

DOI: 10.1016/j.econmod.2016.05.019

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