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Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test

Review of Finance, (Forthcoming)

Posted: 20 Sep 2012  

Dieter Hess

University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

Sebastian Orbe

University of Cologne - Department of Corporate Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 3, 2012

Abstract

Recent findings indicate that macroeconomic survey forecasts are anchoring biased and therefore are inefficient. However, despite highly significant test coefficients a bias adjustment does not improve forecasts’ quality. We find that the cognitive bias is a statistical artifact because the anchoring test is biased itself. In particular, it produces misleading results if macroeconomic analysts use more comprehensive information than assumed by the test. Our results have important implications for a wide range of empirical research relying on survey data to capture market participants’ expectations, for example, studies analyzing the impact of macroeconomic conditions on asset prices, equity risk premiums or market liquidity.

Keywords: macroeconomic announcements, efficiency of forecasts, anchoring bias, rationality of analysts

JEL Classification: G12, G14, G17, E17, E37

Suggested Citation

Hess, Dieter and Orbe, Sebastian, Irrationality or Efficiency of Macroeconomic Survey Forecasts? Implications from the Anchoring Bias Test (September 3, 2012). Review of Finance, (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2148377

Dieter Hess (Contact Author)

University of Cologne - Department of Corporate Finance ( email )

Corporate Finance Seminar
Albertus-Magnus-Platz
D-50923 Cologne
Germany
+49 221 470 7876 (Phone)
+49 221 470 7466 (Fax)

HOME PAGE: http://cf.uni-koeln.de/

University of Cologne - Centre for Financial Research (CFR)

Germany

Sebastian Orbe

University of Cologne - Department of Corporate Finance ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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