Download This PaperPredicting the Signs of Forecast Errors
14 Pages Posted: 24 Nov 2008
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: Suggested Citation
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