Separating Accuracy from Forecast Certainty: A Modified Miscalibration Measure

13 Pages Posted: 19 May 2017 Last revised: 20 Jul 2018

See all articles by Doron Sonsino

Doron Sonsino

Ben-Gurion University of the Negev; Center for Academic Studies

Yaron Lahav

Ben-Gurion University of the Negev

Amir Levkowitz

College of Management Academic Studies

Date Written: May 19, 2017

Abstract

The standard interval forecasting task is modified, asking subjects to provide point predictions for future returns and assess the likelihood of fixed length intervals around their point estimates. The difference between the subjective likelihood estimates and the realized hit rate is advanced as an improved miscalibration measure. Class and take-home studies reveal that 140 of 169 finance students and experts overestimate their hit rates, confirming the overprecision hypothesis. A comparative study additionally shows that the revised task weakly decreases the miscalibration rates from 50% to 38% (p=0.16).

Keywords: Miscalibration, overprecision, interval forecasting, accuracy

JEL Classification: C53, D84, C90

Suggested Citation

Sonsino, Doron and Sonsino, Doron and Lahav, Yaron and Levkowitz, Amir, Separating Accuracy from Forecast Certainty: A Modified Miscalibration Measure (May 19, 2017). Available at SSRN: https://ssrn.com/abstract=2971213 or http://dx.doi.org/10.2139/ssrn.2971213

Doron Sonsino (Contact Author)

Ben-Gurion University of the Negev ( email )

1 Ben-Gurion Blvd
Beer-Sheba 84105, 84105
Israel

Center for Academic Studies ( email )

Ha-Yotsrim 2
Or Yehuda, 6021816
Israel

Yaron Lahav

Ben-Gurion University of the Negev ( email )

Department of Business Administration
P.O. Box 653
Beer Sheva 84105, 84105
Israel
972-8-6479738 (Phone)
972-8-6477691 (Fax)

HOME PAGE: http://www.yaronlahav.com

Amir Levkowitz

College of Management Academic Studies ( email )

Elie Wiesel St 2
Rishon LeTsiyon
Israel

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