Market participants or the random walk – who forecasts better? Evidence from micro-level survey data

Tamas Kiss, Kamil Kladívko, Oliwer Silfverberg and Pär Österholm

Finance Research Letters, 2023, vol. 54, issue C

Abstract: We analyse micro-level data concerning four financial variables in Sveriges Riksbank's Prospera Survey to evaluate the precision of forecasts provided by professionals active in the Swedish fixed-income market. Our results indicate that for the SEK/EUR and SEK/USD exchange rates, and the five-year government bond yield, none of the market participants that frequently participate in the survey manage to significantly outperform the random-walk forecast. For the central bank's policy rate, the market participants typically have a statistically significant higher forecast precision than the random-walk forecast at the three-month horizon; however, at the two- and five-year horizons, the random-walk forecast typically outperforms the market participants.

Keywords: Out-of-sample forecasts; Exchange rates; Interest rates (search for similar items in EconPapers)
JEL-codes: E47 G17 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Market Participants or the Random Walk – Who Forecasts Better? Evidence from Micro Level Survey Data (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001253

DOI: 10.1016/j.frl.2023.103752

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