What Do Professional Forecasters Actually Predict?

Tinbergen Institute Discussion Paper 15-095/III

51 Pages Posted: 8 Aug 2015 Last revised: 22 Oct 2017

See all articles by Didier Nibbering

Didier Nibbering

Erasmus University Rotterdam (EUR) - Department of Econometrics

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Michel van der Wel

Erasmus University Rotterdam; CREATES; ERIM; Tinbergen Institute

Date Written: October 13, 2017

Abstract

In this paper we study what professional forecasters predict. We use spectral analysis and state space modeling to decompose economic time series into a trend, business-cycle, and irregular component. To examine which components are captured by professional forecasters, we regress their forecasts on the estimated components extracted from both the spectral analysis and the state space model. For both decomposition methods we find that the Survey of Professional Forecasters in the short run can predict almost all variation in the time series due to the trend and business-cycle, but the forecasts contain little or no significant information about the variation in the irregular component.

Keywords: forecast evaluation, Survey of Professional Forecasters, expert forecast, trend-cycle decomposition, state space modeling, Baxter-King filter

Suggested Citation

Nibbering, Didier and Paap, Richard and van der Wel, Michel, What Do Professional Forecasters Actually Predict? (October 13, 2017). Tinbergen Institute Discussion Paper 15-095/III. Available at SSRN: https://ssrn.com/abstract=2640878 or http://dx.doi.org/10.2139/ssrn.2640878

Didier Nibbering (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Michel Van der Wel

Erasmus University Rotterdam ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands

CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

ERIM ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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