Predicting the Signs of Forecast Errors

14 Pages Posted: 24 Nov 2008

See all articles by Nazaria Solferino

Nazaria Solferino

University of Rome Tor Vergata - Faculty of Economics

Robert Waldmann

Universita di Roma Tor Vergata; National Bureau of Economic Research (NBER)

Date Written: November 1, 2008

Abstract

The signs of forecast errors can be predicted using the difference between individuals' forecasts and the average of earlier forecasts of the same variable. It is possible to improve forecasts without worsening any. It is difficult to reconcile this result with the rational expectations hypothesis, because the average of earlier forecasts is in the information set of the forecasters

Keywords: Rational Expectations, Panel, Loss Function, Forecast, Interest Rate

JEL Classification: G14, E47

Suggested Citation

Solferino, Nazaria and Waldmann, Robert, Predicting the Signs of Forecast Errors (November 1, 2008). CEIS Working Paper No. 135. Available at SSRN: https://ssrn.com/abstract=1306279 or http://dx.doi.org/10.2139/ssrn.1306279

Nazaria Solferino

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

Robert Waldmann (Contact Author)

Universita di Roma Tor Vergata ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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