Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test
University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)
University of Cologne - Department of Corporate Finance
May 10, 2012
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
Date posted: September 3, 2010 ; Last revised: May 26, 2012
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