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Activity Number:
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223
- Forecasting for Policy in an Uncertain and Rapidly Changing World
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Type:
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Invited
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Date/Time:
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Tuesday, August 9, 2022 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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Abstract #319290
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Title:
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Augmented Information Rigidity Test
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Author(s):
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Tucker McElroy and Xuguang Simon Sheng*
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Companies:
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U.S. Census Bureau and American University
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Keywords:
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Forecast evaluation;
information rigidity;
overreaction;
panel data;
Survey of Professional Forecasters
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Abstract:
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The information rigidity test examines predictability of forecast errors from forecast revisions. This paper provides an augmented information rigidity test that controls for cross-sectional and time series correlations in panel data. Our Monte Carlo simulations show that the proposed tests have satisfactory size and power properties in typical macro panels. Applications of the tests to the U.S. Survey of Professional Forecasters covering 1968Q4 through 2016Q4 clearly reveal experts’ overreaction to news in their macroeconomic expectations.
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Authors who are presenting talks have a * after their name.
