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Do production managers predict turning points? A directional analysis

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  • Tsuchiya, Yoichi

Abstract

This study evaluates the directional accuracy of production managers' forecasts by using a new market-timing test. By extending the directional analysis to the 4×4 case, this study investigates whether Japanese production managers' forecasts correctly predict turning points in production across different industries. This fills a gap in the literature that focused on predicting increase/decrease or acceleration/deceleration using directional analysis of the 2×2 case. It also illustrates its merit over the 2×2 case. This study shows that majority of the forecasts are not useful in predicting turning points in production; however, they are useful in predicting increase/decrease in production. Our findings suggest that the production managers' forecasts serve as early qualitative information of expansion and contraction on the Japanese economy and their accuracy does not differ by phases of business cycles.

Suggested Citation

  • Tsuchiya, Yoichi, 2016. "Do production managers predict turning points? A directional analysis," Economic Modelling, Elsevier, vol. 58(C), pages 1-8.
    • Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:1-8
    DOI: 10.1016/j.econmod.2016.05.019
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    More about this item

    Keywords

    Directional analysis; Multi-horizon forecast; Forecast evaluation; Market-timing test;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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