To Aggregate, Pool, or Neither: Testing the Rational Expectations Hypothesis Using Survey Data

Carl Bonham and Richard Cohen

No 200003, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: It is well known that even if all forecasters are rational, estimated coefficients in unbiasedness regressions using consensus forecasts are inconsistent because forecasters have private information. However, if all forecasters face a common realization, pooled estimators are also inconsistent. In contrast, we show that when predictions and realizations are integrated and cointegrated, micro-homogeneity ensures that consensus and pooled estimators are consistent. Therefore, contrary to claims in the literature, in the absence of micro-homogeneity, pooling is not a solution to the aggregation problem. We reject micro-homogeneity for a number of forecasts from the Survey of Professional Forecasters. Therefore, for these variables unbiasedness can only be tested at the individual level.

Keywords: Rational Expectations; Micro-homogeneity; Heterogeneity Bias; Aggregation Bias; Survey Forecasts (search for similar items in EconPapers)
Pages: 36 pages
Date: 2000
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Citations: View citations in EconPapers (1)

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Journal Article: To Aggregate, Pool, or Neither: Testing the Rational-Expectations Hypothesis Using Survey Data (2001)
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