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Market Participants or the Random Walk – Who Forecasts Better? Evidence from Micro Level Survey Data

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We analyse micro-level data concerning four financial variables in Sveriges Riksbank’s Prospera Survey to evaluate the accuracy of forecasts provided by professionals active in the Swedish fixed-income market. Our results indicate that for the SEK/EUR and SEK/USD exchange rates, and the five-year government bond yield, none of the market participants that frequently participate in the survey manage to significantly outperform the random-walk forecast. For the central bank’s policy rate, the market participants typically have a statistically significant higher forecast accuracy than the random-walk forecast at the three-month horizon; however, at the two- and five-year horizons, the random-walk forecast typically outperform the market participants.

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  • Kiss, Tamás & Kladivko, Kamil & Silfverberg, Oliwer & Österholm, Pär, 2023. "Market Participants or the Random Walk – Who Forecasts Better? Evidence from Micro Level Survey Data," Working Papers 2023:2, Örebro University, School of Business.
    • Handle: RePEc:hhs:oruesi:2023_002
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    More about this item

    Keywords

    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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