An Exploratory Analysis of the Portfolio Managers' Probabilistic Forecasts of Stock Prices

Journal of Forecasting, Vol. 13, pp. 565-578, 1994

Posted: 24 Nov 2008

See all articles by Yaz Gulnur Muradoglu

Yaz Gulnur Muradoglu

Queen Mary University of London; City University London - Sir John Cass Business School

Dilek Onkal

Bilkent University

Abstract

This study reports the results of an experiment that examines (1) the effects of forecast horizon on the performance of probability forecasters, and (2) the alleged existence of an inverse expertise effect, i.e., an inverse relationship between expertise and probabilistic forecasting performance. Portfolio managers are used as forecasters with substantive expertise. Performance of this 'expert' group is compared to the performance of a 'semi-expert' group composed of other banking professionals trained in portfolio management. It is found that while both groups attain their best discrimination performances in the four-week forecast horizon, they show their worst calibration and skill performances in the 12-week forecast horizon. Also, while experts perform better in all performance measures for the one-week horizon, semi-experts achieve better calibration for the four-week horizon. It is concluded that these results may signal the existence of an inverse expertise effect that is contingent on the selected forecast horizon.

Keywords: Probabilistic Forecasting, Stock Price Forecast, Calibration, Inverse Expertise Effect

Suggested Citation

Muradoglu, Yaz Gulnur and Onkal, Dilek, An Exploratory Analysis of the Portfolio Managers' Probabilistic Forecasts of Stock Prices. Journal of Forecasting, Vol. 13, pp. 565-578, 1994. Available at SSRN: https://ssrn.com/abstract=1296864

Yaz Gulnur Muradoglu

Queen Mary University of London ( email )

Francis Bancroft Building
Mile End Road
London, E1 4NS
United Kingdom

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 0124 (Phone)
+44 20 7040 8853 (Fax)

Dilek Onkal (Contact Author)

Bilkent University ( email )

Bilkent University
Faculty of Business Administration
Bilkent, Ankara 06800
Turkey
+90.312.290.1596 (Phone)

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