Abstract

http://ssrn.com/abstract=1669587
 
 

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


Dieter Hess


University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

Sebastian Orbe


University of Cologne - Department of Corporate Finance

May 10, 2012


Abstract:     
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 and that 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.

Number of Pages in PDF File: 50

Keywords: macroeconomic announcements, efficiency of forecasts, anchoring bias, rationality of analysts

JEL Classification: G12, G14, G17, E17, E37

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Date posted: September 3, 2010 ; Last revised: May 26, 2012

Suggested Citation

Hess, Dieter and Orbe, Sebastian, Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test (May 10, 2012). Available at SSRN: http://ssrn.com/abstract=1669587 or http://dx.doi.org/10.2139/ssrn.1669587

Contact Information

Dieter Hess
University of Cologne - Department of Corporate Finance ( email )
Corporate Finance Seminar
Albertus-Magnus-Platz
D-50923 Cologne
Germany
+49 221 470 7876 (Phone)
+49 221 470 7466 (Fax)
HOME PAGE: http://cf.uni-koeln.de/
University of Cologne - Centre for Financial Research (CFR)
Germany
Sebastian Orbe (Contact Author)
University of Cologne - Department of Corporate Finance ( email )
Albertus-Magnus-Platz
Cologne, 50923
Germany
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