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Analysts versus the Random Walk in Financial Forecasting: Evidence from the Czech National Bank’s Financial Market Inflation Expectations Survey

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Abstract

In this paper, we analyse how financial market analysts’ expectations in the Czech National Bank’s Financial Market Inflation Expectations survey perform relative to the random-walk forecast when it comes to predicting five financial variables. Using data from 2001 to 2022, our results indicate that the analysts are able to signifi-cantly outperform the random-walk forecast for the repo rate and Prague Interbank Offered Rate at the one-month forecasting horizon. For the five-year and ten-year interest rate swap rate, the random walk significantly outperforms the analysts at both the one-month and one-year forecasting horizons. For the CZE/EUR ex-change rate, no statistically significant differences in forecast precision were found.

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  • Kladívko, Kamil & Österholm, Pär, 2022. "Analysts versus the Random Walk in Financial Forecasting: Evidence from the Czech National Bank’s Financial Market Inflation Expectations Survey," Working Papers 2022:14, Örebro University, School of Business.
    • Handle: RePEc:hhs:oruesi:2022_014
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    More about this item

    Keywords

    Survey data; Out-of-sample forecasts; Exchange rates; Interest rates;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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