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| Tekijä: | Elliott, G. Komunjer, I. Timmermann, A. |
| Otsikko: | Biases in macroeconomic forecasts: Irrationality or asymmetric loss? |
| Lehti: | Journal of the European Economic Association
2008 : MAR, VOL. 6:1, p. 122-157 |
| Asiasana: | forecasting bias rationality |
| Kieli: | eng |
| Tiivistelmä: | Empirical studies using survey data on expectations have often observed that forecasts are biased and have come to the conclusion that agents are not rational. This study establishes that existing rationality tests are not robust to even small deviations from symmetric loss and thus have little ability to tell whether the forecaster is irrational or the loss function is asymmetric. The trade-off between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality test is quantified. New and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed squared loss as a special case are explored. The results suggest that agents are averse to "bad" outcomes and that they incorporate such loss aversion into their forecasts. |
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