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on Forecasting |
| By: | Dimitris Kenourgios (Athens University of Economics & Business); Nikolaos Pavlidis (Brunel University) |
| Abstract: | This paper presents an analysis of two forms of overreaction (generalized overreaction and overreaction to prior earnings changes) in analysts’ earnings forecasts for the UK stock market, using a sample of individual forecasts of earning per share from a British investment bank over the period 1989-2002. Given that previous UK empirical research over 1980s and mid ‘90s has provided limited and contradictory findings, we investigate whether and how overreaction of analysts forecasts varies across forecast horizons, firm size (small and large) and growth opportunities (high and low P/E ratio) in order to provide further and comparable evidence. Overall, our findings support the generalized overreaction hypothesis but reject the firm size effect, the overreaction for high P/E ratio companies and the higher overreaction regarding the forecasting horizon. |
| Keywords: | Overreaction, Underreaction, Analysts forecasts, forecast horizons, size effect, price/earnings ratio. |
| JEL: | G10 G14 |
| Date: | 2005–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0512011&r=for |
| By: | Albert Lee Chun (Stanford University) |
| Abstract: | Through explicitly incorporating analysts' forecasts as observable factors in a dynamic arbitrage- free model of the yield curve, this paper proposes a framework for studying the impact of shifts in market sentiment on interest rates of all maturities. An empirical examination reveals that survey expectations about in°ation, output growth and the anticipated path of monetary policy actions contain important information for explaining movements in bond yields. Although perceptions about in°ation are largely responsible for movements in long-term interest rates, an explicit slope factor is necessary to adequately capture the dynamics of the yield curve. Macroeconomic forecasts play an important role in explaining time-variation in the market prices of risk, with forecasted GDP growth playing a dominant role. The estimated coe±cients from a forward-looking monetary policy rule support the assertion that the central bank preemptively reacts to in°ationary expectations while suggesting patience in accommodating real output growth expectations. Models of this type may provide traders and policymakers with a new set of tools for formally assessing the reaction of bond yields to shifts in market expectations due to the arrival of news or central bank statements and announcements. |
| Keywords: | term structure, interest rates, affine model, forward-looking policy rule, macro-finance, no-arbitrage, blue-chip forecasts, survey data |
| JEL: | E40 E43 E44 G12 D84 E52 E58 |
| Date: | 2005–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0512006&r=for |
| By: | Elena Ianchovichina (The World Bank); Pooja Kacker (The World Bank) |
| Abstract: | The authors present real per capita GDP growth forecasts for all developing countries for the period 2005-14. For 55 of these countries, representing major world regions and accounting for close to 80 percent of the developing world's GDP, they forecast the growth effects of the main forces underpinning growth, assuming that these evolve following past trends. The authors find that for the average developing country the largest growth dividend comes from continued improvement in public infrastructure, followed by the growth contributions of rising secondary school enrollment, trade openness, and financial deepening. The joint contribution of these four growth determinants to average, annual per capita GDP growth in the next decade is estimated to be 1 percentage point. Failure to keep improving public infrastructure alone could reduce this growth dividend by 50 percent. The forecasted growth contributions differ by country qualitatively and quantitatively. |
| Keywords: | ??? |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3775&r=for |
| By: | Carsten A Holz (Hong Kong University of Science & Technology) |
| Abstract: | Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015, if not several years after, allows inferences about future GDP growth. Short of some cataclysmic event, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor. |
| Keywords: | economic growth, growth accounting, growth forecasts, development theories, human capital formation, education (all: China) |
| JEL: | O1 O10 O11 O4 O40 O47 O53 J11 O3 I21 |
| Date: | 2005–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0512002&r=for |
| By: | Frédérick Demers |
| Abstract: | The author proposes and evaluates econometric models that try to explain and forecast real quarterly housing expenditures in Canada. Structural and leading-indicator models of the Canadian housing sector are described. The long-run relationship between expenditure and its determinants is shown to have shifted during the late 1970s, which implies that important changes have occurred in how the housing market is driven. The author finds that the response of housing investment to interest rates has become more pronounced over time. He compares out-of-sample forecasts from linear and non-linear cointegration models (which make use of information on fundamentals such as wealth and demographics) with forecasts from simple leading-indicator models (which exploit information such as housing starts or household indebtedness). The author finds that simple leading-indicator models can provide relatively accurate near-term forecasts. The preferred structural model, which allows for a shift in the cointegrating vector, provides a rich analysis of the housing sector, with good forecast accuracy on the construction side but not on the resale side, which is more difficult to predict. |
| Keywords: | Economic models; Econometric and statistical methods |
| JEL: | R21 E27 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:05-41&r=for |
| By: | Giuseppe Carone (European Commission - DG ECFIN) |
| Abstract: | This paper presents the methodology and results of labour force projections over the long term (until 2050) for each of the 25 EU Member States. These projections were undertaken in order to provide the background technical inputs for the assessment of the potential economic and fiscal impact of an ageing population. The projections presented in this paper show the outcome for the labour force of extrapolating recent trends in labour market behaviour (entry and exit rates from the labour market). These base case projections reflect the working assumption of “no policy change” and are neither forecasts nor predictions in that they are not based on any assessment of more or less likely future changes in working patterns or economic conditions. To summarise the outcome of projections, the baseline scenario indicates that, notwithstanding the projected increase in the participation rates and the reduction in unemployment rates, the pace of labour force and employment growth in the EU25 will be weakly positive over the next 15 years and will turn negative over the period 2018 to 2050. These is mainly the outcome of projected declining trends for the working-age population and a shift in the age structure of the population towards older, less participating groups - a consequence of the baby-boom generation approaching retirement and the succeeding lower-birth-rate cohorts reaching working age. |
| Keywords: | Labour force projections, population projections, cohort method, ageing population, dependency ratios |
| JEL: | J10 J11 J14 J21 J26 I00 |
| Date: | 2005–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0512006&r=for |