Disagreement versus Uncertainty: Evidence from Distribution Forecasts

32 Pages Posted: 10 Aug 2010 Last revised: 15 Apr 2015

See all articles by Fabian Krueger

Fabian Krueger

Heidelberg Institute for Theoretical Studies (HITS) gGmbH

Ingmar Nolte

Lancaster University - Department of Accounting and Finance

Date Written: April 15, 2015

Abstract

We use a cross-section of economic survey forecasts to predict the distribution of US macro variables in real time. This generalizes the existing literature, which uses disagreement (i.e., the cross-sectional variance of survey forecasts) to predict uncertainty (i.e., the conditional variance of future macroeconomic quantities). Our results show that cross-sectional information can be helpful for distribution forecasting, but this information needs to be modelled in a statistically efficient way in order to avoid overfitting. A simple one-parameter model which exploits time variation in the cross-section of survey point forecasts is found to perform well in practice.

Keywords: Disagreement, Uncertainty, Predictive Density, Forecast Combination

JEL Classification: C53, C83, E7, F7

Suggested Citation

Krueger, Fabian and Nolte, Ingmar, Disagreement versus Uncertainty: Evidence from Distribution Forecasts (April 15, 2015). Available at SSRN: https://ssrn.com/abstract=1656213 or http://dx.doi.org/10.2139/ssrn.1656213

Fabian Krueger

Heidelberg Institute for Theoretical Studies (HITS) gGmbH ( email )

Schloss-Wolfsbrunnenweg 35
Heidelberg, D-69118
Germany

Ingmar Nolte (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

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