Friday, September 13, 2024

Over-precision and forecast errors - don't follow the professionals

 

In the paper, "Overprecision in the survey of professional forecasters", researchers look at one of the longest macro forecast surveys and find that these forecasters are overly precise. They have much more confidence than what would be expected by their accuracy. They may not have an optimistic bias, but they sure have a confidence bias. Follow their forecasts with skepticism especially when they say that their forecast is a no-brainer. 

With this overprecision, there is a good reason to do your own research or just follow the forecast that is embedded in prices. You don't need the professionals.

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