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Bias, rationality and asymmetric loss functions

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  • Bürgi, Constantin

Abstract

In the literature, it is a common empirical finding that survey based expectations are biased at the individual level. This has sparked a large debate if forecasters have asymmetric loss functions or the rationality assumption is violated. In this paper, I will show that the bias can in large part be explained by the pattern of missing observations in the survey. Thus the assumption of asymmetric loss functions is not required to satisfy the rationality assumption.

Suggested Citation

  • Bürgi, Constantin, 2017. "Bias, rationality and asymmetric loss functions," Economics Letters, Elsevier, vol. 154(C), pages 113-116.
    • Handle: RePEc:eee:ecolet:v:154:y:2017:i:c:p:113-116
    DOI: 10.1016/j.econlet.2017.03.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Forecast bias; Asymmetric loss function; Expectations; SPF; Bloomberg survey;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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