Forecaster (Mis-) behavior

Tobias Broer () and Alexandre L. Kholhas
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Tobias Broer: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Alexandre L. Kholhas: IIES - Institute for International Economic Studies

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Abstract: We document two stylized facts in expectational data. First, professional forecasters overrevise their macroeconomic expectations. Second, such overrevisions mask evidence of both over- and underreactions to public signals. We show that the first fact is inconsistent with standard models of noisy rational expectations, but consistent with behavioral and strategic models. The second fact, in contrast, presents a puzzle for existing theories. We propose an extension of noisy rational expectations that allows forecasters to be overconfident in their information. We show that this feature when combined with the endogeneity of public signals leads to over- and undereactions consistent with the data.

Keywords: Expectations; Forecasters; Information (search for similar items in EconPapers)
Date: 2024-09
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Citations: View citations in EconPapers (4)

Published in Review of Economics and Statistics, 2024, 106 (5), pp.1334-1351. ⟨10.1162/rest_a_01210⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03956330

DOI: 10.1162/rest_a_01210

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