Do Corporate Executives Have Accurate Predictions for the Economy? A Directional Analysis

Abstract:     
Although many studies on the directional accuracy of forecasts by international organizations and professional forecasters have been scrutinized, little attention has been paid to forecasts by business leaders. In order to address this gap, we use directional tests to investigate whether forecasts of Gross Domestic Product by corporate executives are valuable to their users. Our findings indicate that all the forecasts with forecast horizons from 1–14 months are valuable, whereas established literature indicates that longer-term forecasts tend not to be valuable. This suggests that corporate executives are concerned with and focus on longer-term economic environments and can therefore serve as an important resource for policy-makers.

Number of Pages in PDF File: 16

Keywords: forecast evaluation, directional analysis, forecast accuracy, forecastability, survey data

JEL Classification: E17, E27, E60

working papers series