Testing for Differences in Survey-Based Density Expectations: A Compositional Data Approach

33 Pages Posted: 9 Feb 2023

See all articles by Jonas Dovern

Jonas Dovern

Friedrich Alexander University Erlangen Nuremberg

Alexander Glas

Friedrich Alexander University Erlangen Nuremberg; ZEW – Leibniz Centre for European Economic Research

Geoff Kenny

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: 2023

Abstract

We propose to treat survey-based density expectations as compositional data when testing either for heterogeneity in density forecasts across different groups of agents or for changes over time. Monte Carlo simulations show that the proposed test has more power relative to both a bootstrap approach based on the KLIC and an approach which involves multiple testing for differences of individual parts of the density. In addition, the test is computationally much faster than the KLIC-based one, which relies on simulations, and allows for comparisons across multiple groups. Using density expectations from the ECB Survey of Professional Forecasters and the U.S. Survey of Consumer Expectations, we show the usefulness of the test in detecting possible changes in density expectations over time and across different types of forecasters.

Keywords: compositional data, density forecasts, survey forecasts, disagreement

JEL Classification: C120, D840, E270

Suggested Citation

Dovern, Jonas and Glas, Alexander and Kenny, Geoff, Testing for Differences in Survey-Based Density Expectations: A Compositional Data Approach (2023). CESifo Working Paper No. 10256, Available at SSRN: https://ssrn.com/abstract=4352367 or http://dx.doi.org/10.2139/ssrn.4352367

Jonas Dovern (Contact Author)

Friedrich Alexander University Erlangen Nuremberg ( email )

Erlangen-Nuremberg
Germany

Alexander Glas

Friedrich Alexander University Erlangen Nuremberg ( email )

Erlangen-Nuremberg
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Geoff Kenny

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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