Journal Article

Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test

Dieter Hess and Sebastian Orbe

in Review of Finance

Published on behalf of European Finance Association

Volume 17, issue 6, pages 2097-2131
Published in print November 2013 | ISSN: 1572-3097
Published online January 2013 | e-ISSN: 1573-692X | DOI: https://dx.doi.org/10.1093/rof/rfs037
Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test

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  • General Aggregative Models
  • Financial Forecasting and Simulation
  • Economics
  • Prices, Business Fluctuations, and Cycles

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Recent findings indicate that macroeconomic survey forecasts are anchoring biased and therefore are inefficient. However, despite highly significant test coefficients, a bias adjustment does not improve forecasts’ quality. We find that the cognitive bias is a statistical artifact because the anchoring test is biased itself. In particular, it produces misleading results if macroeconomic analysts use more comprehensive information than assumed by the test. Our results have important implications for a wide range of empirical research relying on survey data to capture market participants’ expectations, for example, studies analyzing the impact of macroeconomic conditions on asset prices, equity risk premiums, or market liquidity.

Keywords: G12; G14; G17; E17; E37

Journal Article.  10869 words.  Illustrated.

Subjects: General Aggregative Models ; Financial Forecasting and Simulation ; Economics ; Prices, Business Fluctuations, and Cycles

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