Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters

24 Pages Posted: 20 Apr 2006 Last revised: 25 Sep 2010

See all articles by Joseph Engelberg

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

Charles F. Manski

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Jared Williams

University of South Florida

Date Written: January 2006

Abstract

We use data from the Survey of Professional Forecasters to compare point forecasts of GDP growth and inflation with the subjective probability distributions held by forecasters. We find that SPF forecasters summarize their underlying distributions in different ways and that their summaries tend to be favorable relative to the central tendency of the underlying distributions. We also find that those forecasters who report favorable point estimates in the current survey tend to do so in subsequent surveys. These findings, plus the inescapable fact that point forecasts reveal nothing about the uncertainty that forecasters feel, suggest that the SPF and similar surveys should not ask for point forecasts. It seems more reasonable to elicit probabilistic expectations and derive measures of central tendency and uncertainty, as we do here.

Suggested Citation

Engelberg, Joseph and Manski, Charles F. and Williams, Jared, Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters (January 2006). NBER Working Paper No. w11978. Available at SSRN: https://ssrn.com/abstract=878065

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Charles F. Manski (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8223 (Phone)
847-491-7001 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jared Williams

University of South Florida ( email )

Tampa, FL 33620
United States

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