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Forecaster (Mis-)Behavior

Author

Listed:
  • Tobias Broer

    (Paris School of Economics)

  • Alexandre N. Kohlhas

    (University of Oxford)

Abstract

We document two stylized facts in expectational survey data. First, professional forecasters overrevise their macroeconomic expectations. Second, such overrevisions mask evidence of both over- and underreactions to public signals. We show that the first fact is inconsistent with standard models of noisy rational expectations, but consistent with behavioral and strategic models. The second fact, in contrast, presents a puzzle for existing theories. We propose an extension of noisy rational expectations that allows forecasters to be overconfident in their information. We show that this feature when combined with the endogeneity of public signals leads to over- and undereactions consistent with the data.

Suggested Citation

  • Tobias Broer & Alexandre N. Kohlhas, 2024. "Forecaster (Mis-)Behavior," The Review of Economics and Statistics, MIT Press, vol. 106(5), pages 1334-1351, September.
    • Handle: RePEc:tpr:restat:v:106:y:2024:i:5:p:1334-1351
    DOI: 10.1162/rest_a_01210
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