EconPapers    
Economics at your fingertips  
 

Forecaster (Mis-)Behavior

Alexandre Kohlhas and Tobias Broer
Additional contact information
Alexandre Kohlhas: Institute for International Economic Studies, Stockholm University
Tobias Broer: Stockholm University

No 1171, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We document how professional forecasts overrespond to new information. We show that such overresponses are inconsistent with rational expectation formation with noisy information, common agency-based models of forecaster behavior, as well as several behavioral alternatives. In place, we propose a simple model of absolute and relative overconfidence, consistent with the stylized facts. Unlike rational forecasters, overconfident forecasters are overoptimistic about the precision of their private information and believe it to be superior to that held by others. We show how this causes forecasters to misinterpret the information content of market-generated public outcomes. Consequently, forecasters not only overrespond to private information but also to observed public news. We document how the latter is a pervasive feature of the forecast data. Last, we use the model to shed light on the importance of misperceptions about public information for expectation formation.

New Economics Papers: this item is included in nep-cbe
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://economicdynamics.org/meetpapers/2019/paper_1171.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1171

Access Statistics for this paper

More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2019-10-08
Handle: RePEc:red:sed019:1171