Consensus Forecasts and Inefficient Information Aggregation

Christopher Crowe

No 2010/178, IMF Working Papers from International Monetary Fund

Abstract: Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper finds that: consensus forecasts are inefficient as predicted; this is not due to individual forecaster irrationality; forecasters appear unaware of this inefficiency; and a simple adjustment reduces forecast errors by 5 percent. Similar results are found using US nominal GDP forecasts. The paper also discusses the result’s implications for users of forecaster surveys and for the literature on information aggregation.

Keywords: WP; math; table; Consensus Forecasts; Information Aggregation; Forecast Efficiency; beta coefficient estimate; squared consensus; horizon result; GDP estimate; coefficient estimate; root mean; mean coefficient; mean beta coefficient estimate; furthest out; variance of the coefficient estimate; SPF dataset; idiosyncratic error; Global (search for similar items in EconPapers)
Pages: 43
Date: 2010-07-01
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Citations: View citations in EconPapers (18)

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