How to Summarize the Survey of Professional Forecasters?

Tae-Hwy Lee () and Saerom Lee ()
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Tae-Hwy Lee: Department of Economics, University of California Riverside
Saerom Lee: University of California, Riverside

No 202515, Working Papers from University of California at Riverside, Department of Economics

Abstract: The mean responses in the Survey of Professional Forecasters (SPF) are commonly used to summarize individual forecasts. We propose a new summary forecast that improves the mean responses by incorporating idiosyncratic responses. We note that individual forecasts are not only highly correlated but also heterogeneous. High correlation postulates a factor structure, which we capture with the mean responses. Heterogeneity arises from idiosyncratic responses after accounting for the common mean responses. Using the SPFs from the Philadelphia Fed and European Central Bank, we show that incorporating informative idiosyncratic responses can lead to improved forecasting performance over the mean responses.

Keywords: mean responses; common components; idiosyncratic components; high dimension; sparsity; imputing missing responses (search for similar items in EconPapers)
JEL-codes: C22 C32 (search for similar items in EconPapers)
Pages: 18 Pages
Date: 2025-10
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