Abstract
People are reluctant to admit mistakes. This could also be true of economic forecasters. If revisions of past forecasts are costly, then it will become optimal for forecasters to only partially adjust a past forecast in the light of new information. The unwillingness to admit to the mistake in the old forecast generates a bias of the new forecast in the direction of the old forecast. We test this hypothesis for the joint predictions of the Association of German Economic Research Institutes over the last 35 years. We find some evidence for such a bias and compute the implied unwillingness to revise forecasts.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 401-413 |
| Number of pages | 13 |
| Journal | Journal of Forecasting |
| Volume | 25 |
| Issue number | 6 |
| DOIs | |
| State | Published - Sep 2006 |
All Science Journal Classification (ASJC) codes
- Modeling and Simulation
- Computer Science Applications
- Strategy and Management
- Statistics, Probability and Uncertainty
- Management Science and Operations Research
Keywords
- Adjustment cost
- Forecast rationality
- Forecast revisions