1,721,009 research outputs found
A mirage?
No full textExperimental research found contradictory results regarding the occurrence of informational cascades. Whereas Anderson and Holt [Anderson, L.R., Holt, C.A., 1997. Information cascades in the laboratory. The American Economic Review 87, 847–862] confirmed the model of Banerjee [Banerjee, A.V., 1992. A simple model of herd behavior. The Quarterly Journal of Economics 107, 797–817], and Bikhchandani et al. [Bikhchandani, S., Hishleifer, D., Welch, I., 1992. A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of Political Economy 100, 992–1026] through lab tests, Huck and Oechssler [Huck, S., Oechssler, J., 2000. Informational cascades in the laboratory: do they occur for the right reasons? Journal of Economic Psychology 21, 661–671] came to contradictory results on crucial issues. This article presents experimental evidence supporting further doubts concerning “Bayesian” informational cascades: just under two thirds of all decisions are characterized by an excessive orientation towards the private signal, and only a small number of the subjects (<6 percent) make rational decisions systematically and consistently
Forecasting European interest rates in times of financial crisis – What insights do we get from international survey forecasts?
No full textInterest rate forecasts are widely used in the international financial services industry. For decades, both practitioners and academic researchers question the quality and usefulness of forecasts. Survey predictions do not only deliver point forecasts but also allow to draw conclusions with regard to the variety of forecasts provided by professional analysts. We evaluate the quality of interest rate forecasts for the three months interbank rate in the UK (LIBOR) and Germany (EURIBOR) as well as the corresponding 10Y government bond yields using the root mean squared error as well as the Theil’s U measure and also apply models of time series analysis (i.e. cointegration and causality analysis). Finally, we check for possible implications from uncertainty measures (i.e. High-Low-Spread of forecasts as well as forecast errors) and structural breaks. We are able to find some links to the real economy. Applying our methodological approach both to the UK and Germany we are able to draw conclusions with regard to the quality of international forecasts in times of uncertainty
Interest rate forecasts in Latin America
No full textPurpose This paper aims to assess the quality of interest rate forecasts for the money markets in Argentina, Brazil, Chile, Mexico and Venezuela for the period between 2001 and 2019. Future interest rate trends are of key significance for many business-related decisions. Thus, reliable interest rate forecasts are essential, for example, for banks that make profits by carrying out maturity transformations. Design/methodology/approach The data that we analyze were collected by Consensus Economics through a monthly survey with over 120 renowned economists and were published between 2001 and 2019 in the journal Latin American Consensus Forecasts . The authors use the Diebold-Mariano test, the sign accuracy test, the TOTA coefficient and the unbiasedness test to determine the precision and biasedness of the forecasts. Findings The research reveals that the forecasting work carried out in Brazil, Chile and Mexico is remarkably successful. The quality of forecasts from Argentina and Venezuela, on the other hand, is significantly poorer. Originality/value Over 50 studies have already been published with regard to the accuracy of interest rate forecasts, emphasizing the importance of the topic. However, interest rate forecasts for Latin American money markets have hardly been considered thus far. The paper closes this research gap. Overall, the analyzed database amounts to a total of 209 forecast time series with 28,451 individual interest rate forecasts. This study is thus far more comprehensive than all previous studies
Strategic coordination in forecasting: An experimental study
Full text linkReputational herding has been considered as a driving force behind economic and financial forecasts clustered around consensus values. Strategic coordination can consequently explain poor performances of prediction markets as resulting from the distinct incentives that forecasters face. While this notion has been considered theoretically and empirically, the underlying behavioral working mechanisms have not yet been described. We thus put forth an exploratory experiment on the emergence and robustness of coordination in a forecasting setting implementing contradictory incentives for accurate forecasts and coordination. Forecasts are shown to be inaccurate and biased toward current values. This in turn has subjects aiming at coordination benefits. Predominantly, coordination is achieved through the risk-dominant equilibrium as the game proceeds. Once established, coordination is fairly stable and adds to overall welfare. Our results support the assumption of rational herding as a driving force for predictions of poor accuracy that are systematically biased towards focal points
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