Predicting the Signs of Forecast Errors

Solferino NazariaWaldmann Robert J.
CEIS Research Paper
The signs of forecast errors can be predicted using the difference between individuals' forecasts and the average of earlier forecasts of the same variable. It is possible to improve forecasts without worsening any. It is difficult to reconcile this result with the rational expectations hypothesis, because the average of earlier forecasts is in the information set of the forecasters
Number: 135
Keywords: Rational Expectations, Panel, Loss Function, Forecast, Interest Rate
JEL codes: G14, E47
Volume: 6
Issue: 10
Date: Monday, November 24, 2008
Revision Date: Monday, November 24, 2008