Anchoring Effect on Macroeconomic Forecasts: A Heterogeneity Approach

Tzu-Pu Chang and Ray Yeutien Chou
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Ray Yeutien Chou: Institute of Economics, Academia Sinica, 128 Academia Rd., Sec. 2, Nankang, Taipei 11529, Taiwan
Authors registered in the RePEc Author Service: Ray Yeutien Chou

Journal for Economic Forecasting, 2018, issue 4, 134-147

Abstract: With respect to the rational expectation hypothesis, some previous studies adopted a behavioral perspective to explain why forecast biases occur. One widely-discussed behavioral bias in forecasting is the anchoring and adjustment heuristics. This paper proposes a two-anchor heterogeneity model to simultaneously estimate the anchoring biases in individual and consensus forecasts. The results show that the previous individual forecast and consensus forecast anchor the forecasts of the U.S. macroeconomic series. Generally, forecasters slowly adjust their prior belief and behave stubbornly. Moreover, the individual forecaster also presents substantial and heterogeneous anchoring bias. A robustness analysis using Eurozone data is consistent with the findings mentioned above.

Keywords: anchoring effect; macroeconomic forecast; rational expectation; heterogeneity model; consensus forecast (search for similar items in EconPapers)
JEL-codes: C23 E37 (search for similar items in EconPapers)
Date: 2018
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