Does More Expert Adjustment Associate with Less Accurate Professional Forecasts?

Philip Hans Franses and Max Welz
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Max Welz: Econometric Institute, Erasmus School of Economics, POB 1738, NL-3000 DR Rotterdam, The Netherlands

JRFM, 2020, vol. 13, issue 3, 1-8

Abstract: Professional forecasters can rely on an econometric model to create their forecasts. It is usually unknown to what extent they adjust an econometric model-based forecast. In this paper we show, while making just two simple assumptions, that it is possible to estimate the persistence and variance of the deviation of their forecasts from forecasts from an econometric model. A key feature of the data that facilitates our estimates is that we have forecast updates for the same forecast target. An illustration to consensus forecasters who give forecasts for GDP growth, inflation and unemployment for a range of countries and years suggests that the more a forecaster deviates from a prediction from an econometric model, the less accurate are the forecasts.

Keywords: professional forecasters; econometric model; expert adjustment; forecast accuracy (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
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Working Paper: Does More Expert Adjustment Associate with Less Accurate Professional Forecasts? (2020)
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