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Inefficient Use of Competitors’ Forecasts?

André Reslow

No 2019:9, Working Paper Series from Uppsala University, Department of Economics

Abstract: This paper assesses to what extent forecasters make effcient use of competitors' forecasts. Using a panel of forecasters, I find that forecasters underuse information from their competitors in their forecasts for current and next year's annual GDP growth and inflation. The results also show that forecasters increase the attention to their competitors as the forecast horizon decreases. In a model of noisy information with fixed target forecasts, I confirm the empirical results of underuse of competitors' information. I also extend the model to include a revision cost and show how this can explain the observed ineffciency and observed horizon dynamics. Using the same model framework, I also rule out overconfidence as the main explanation of the observed behavior.

Keywords: Forecast Behavior; Efficiency; Revision Cost; Forecast Smoothing; Overconfidence (search for similar items in EconPapers)
JEL-codes: C53 D82 E17 E37 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2019-10-12
New Economics Papers: this item is included in nep-mac
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