What Determines Forecasters’ Forecasting Errors?

34 Pages Posted: 26 Jan 2010 Last revised: 21 Jul 2018

See all articles by Ingmar Nolte

Ingmar Nolte

Lancaster University - Department of Accounting and Finance

Sandra Nolte (Lechner)

Lancaster University Management School

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE)

Date Written: July 10, 2018

Abstract

This paper contributes to the growing literature in macroeconomics and finance on expectation formation and information processing by analyzing the relationship between expectation formation at the individual level and the prediction of macroeconomic aggregates. Using information from business tendency surveys we present a new approach of analyzing qualitative forecasting errors made by forecasters. Based on a quantal response approach with misclassification we define qualitative mispredictions of forecasters in terms of deviations from the qualitative rational expectation forecast and relate them to individual and macro factors driving these mispredictions. Our approach permits a detailed analysis of individual forecasting decisions allowing for the introduction of individual and economy wide determinants that affect the individual forecasting error process.

Keywords: Expectations, Tendency Survey, Forecasting Errors, Misclassification, GLARMA

JEL Classification: C23, C25, D84, E27

Suggested Citation

Nolte, Ingmar and Nolte (Lechner), Sandra and Pohlmeier, Winfried, What Determines Forecasters’ Forecasting Errors? (July 10, 2018). Available at SSRN: https://ssrn.com/abstract=1541799 or http://dx.doi.org/10.2139/ssrn.1541799

Ingmar Nolte

Lancaster University - Department of Accounting and Finance ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Sandra Nolte (Lechner) (Contact Author)

Lancaster University Management School ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE) ( email )

Konstanz, D-78457
Germany

HOME PAGE: http://econometrics.wiwi.uni-konstanz.de

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