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Are household subjective forecasts of personal finances accurate and useful? A directional analysis of the British Household Panel Survey

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  • Joshy Easaw

    (Department of Economics and International Development, University of Bath, Bath, UK)

  • Saeed Heravi

    (Cardiff Business School, University of Cardiff, Cardiff, UK)

Abstract

The purpose of the paper is to analyse the accuracy and usefulness of household subjective forecasts of personal finance. We use non-parametric directional analysis to assess the subjective forecasts which are based on qualitative judgments. Using the British Household Panel Survey (BHPS) we are able to analyse a large number of individuals over a number of years. We also take into account individual characteristics such as gender, age, education and employment status when assessing their subjective forecasts. The paper extends the existing literature in two ways: the accuracy and usefulness of subjective forecasts, based on directional analysis, are assessed at the household level for the first time. Secondly, we adapt and extend the methods of directional analysis, which are applied to the household panel or longitudinal survey. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Joshy Easaw & Saeed Heravi, 2009. "Are household subjective forecasts of personal finances accurate and useful? A directional analysis of the British Household Panel Survey," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(8), pages 667-680.
    • Handle: RePEc:jof:jforec:v:28:y:2009:i:8:p:667-680
    DOI: 10.1002/for.1114
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    References listed on IDEAS

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    4. Ash, J. C. K. & Smyth, D. J. & Heravi, S. M., 1998. "Are OECD forecasts rational and useful?: a directional analysis," International Journal of Forecasting, Elsevier, vol. 14(3), pages 381-391, September.
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    7. Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," The Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July.
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    Cited by:

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    2. Y. Tsuchiya, 2014. "A directional evaluation of corporate executives' exchange rate forecasts," Applied Economics, Taylor & Francis Journals, vol. 46(1), pages 95-101, January.
    3. Tsuchiya, Yoichi, 2013. "Do corporate executives have accurate predictions for the economy? A directional analysis," Economic Modelling, Elsevier, vol. 30(C), pages 167-174.
    4. Tsuchiya, Yoichi, 2016. "Do production managers predict turning points? A directional analysis," Economic Modelling, Elsevier, vol. 58(C), pages 1-8.

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