On aggregation bias in fixed-event forecast efficiency tests

Isiklar, Gultekin

doi:10.1016/j.econlet.2005.06.003

Cited by 8 publications

(3 citation statements)

References 7 publications

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“…This test is conducted for both the first and second lag of revisions. The use of the second lag in the revision regressions for the evaluation of Consensus Forecasts goes back to Isiklar (2005). He shows that due to a problem associated with individual-specific information sets, the Consensus regressions using two lags of revisions prevent the danger of inconsistent estimations and even increase the chance of detecting forecast inefficiency as opposed to tests with the individual forecasts.…”

Section: Results For the Forecast Revisionsmentioning

confidence: 99%

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The accuracy and efficiency of the Consensus Forecasts: A further application and extension of the pooled approach

Ager

Kappler

Osterloh

2009

International Journal of Forecasting

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp07058.pdf Non-technical summaryThe last decade has seen marked economic fluctuations in the major industrial countries, which regularly present business cycle forecasters with a challenge. In this paper we are interested in how professional forecasters managed to predict GDP and price developments during the last decade. To this end, we explore the accuracy and evolution of the Consensus Forecast for twelve industrial countries for the years 1996 to 2006. This pooled forecast has the main advantage that it offers monthly publications of revised forecasts for the current and the next year, so that an explicit revision process of 24 forecasts for every target year can be observed.The theoretical and econometric analysis is based on the framework of Davies and Lahiri (1995) and Clements et al. (2006). The latter employ a pooling procedure which permits the evaluation of all forecasts for each target variable over 24 horizons simultaneously. Adopting this methodology allows us to draw conclusions on evaluating systematic forecast bias and, by applying a test on the predictability of forecast revisions, on the efficient use of new information for all forecast horizons jointly. It is shown how the pooled approach needs to be adjusted in order to accommodate the forecasting scheme of the Consensus Forecasts.Furthermore, the pooled approach is extended by a sequential test with the purpose of detecting the critical horizon beyond which the forecast should be regarded as biased.Moreover, we show how the pooled tests for the predictability of forecast revisions can be improved by taking heteroscedasticity in the form of target year-specific variances of macroeconomic shocks into account.In the empirical part we first present results in the form of analytical confidence intervals surrounding the horizon-specific bias estimates which allow intuitive and meaningful interpretations. The test for common bias reveals that several countries show biased forecasts, especially with forecasts covering more than 12 months. These results partially confirm the presumption that the macroeconomic forecasts for the past 10 years were severely affected by the pronounced shocks in that period. The fact that for individual countries systematic biases can be observed by applying the Consensus Forecasts reveals that in these countries the forecasting industry on the whole was not able to cope with the shoc...

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Section: Results For the Forecast Revisionsmentioning

confidence: 99%

“…Applying the second lags of revisions following the approach by Isiklar (2005), the GDP growth predictions were devastating in terms of efficiency. For no single country we found evidence in favour of weak efficiency.…”

mentioning

confidence: 99%

The accuracy and efficiency of the Consensus Forecasts: A further application and extension of the pooled approach

Ager

Kappler

Osterloh

2009

International Journal of Forecasting

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“…Isiklar () also notes that problems arising from aggregation in the fixed‐event forecast evaluation are not as serious as they are in the fixed‐horizon forecast evaluation such as the Mincer–Zarnowitz test.…”

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confidence: 99%

Evaluating the Efficiency of the FOMC's New Economic Projections

Arai¹

2016

J of Money Credit Banking

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Since 2007, Federal Open Market Committee (FOMC) policymakers have been publishing detailed numerical projections of macroeconomic series over the next 3 years. By testing whether the revisions to these projections are unpredictable, I find that FOMC's efficiency is generally accepted for inflation but often rejected for real economic variables, notably for the unemployment rate. The rejection is due to the strong autocorrelation of revisions, which may reflect information rigidity of FOMC's unemployment projections. The joint efficiency of the entire projection is accepted in most cases.

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Are aggregate corporate earnings forecasts unbiased and efficient?

Deschamps

2014

Rev Quant Finan Acc

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On aggregation bias in fixed-event forecast efficiency tests

Cited by 8 publications

References 7 publications

The accuracy and efficiency of the Consensus Forecasts: A further application and extension of the pooled approach

The accuracy and efficiency of the Consensus Forecasts: A further application and extension of the pooled approach

Evaluating the Efficiency of the FOMC's New Economic Projections

Are aggregate corporate earnings forecasts unbiased and efficient?

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