Consensus Forecasts and Inefficient Information Aggregation
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Summary:
Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper finds that: consensus forecasts are inefficient as predicted; this is not due to individual forecaster irrationality; forecasters appear unaware of this inefficiency; and a simple adjustment reduces forecast errors by 5 percent. Similar results are found using US nominal GDP forecasts. The paper also discusses the result’s implications for users of forecaster surveys and for the literature on information aggregation.
Series:
Working Paper No. 2010/178
Subject:
English
Publication Date:
July 1, 2010
ISBN/ISSN:
9781455201891/1018-5941
Stock No:
WPIEA2010178
Pages:
43
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