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on Forecasting |
| By: | H.M. Anderson; H. Chan; R. Faff; Y.K. Ho |
| Abstract: | Abstract: We study information flows between earnings and forecasts, using suitably adapted Granger causality tests. This approach complements existing cross-sectional studies by abstracting from stock market reactions to information, and focussing on dynamic interactions between information flows instead. We find bi-directional causality in timeseries of analyst earnings forecasts and reported earnings, supporting our expectation that forecasts contribute to information that is reflected in future reports. Further, our evidence of feedback suggests that past reports and forecasts are both reflected in future forecasts, implying that the information in reports has inherent value, and that forecasts do not fully substitute for reports. |
| JEL: | G14 M41 C32 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2007-488&r=for |
| By: | Christina D. Romer; David H. Romer |
| Abstract: | Should monetary policymakers take the staff forecast of the effects of policy actions as given, or should they attempt to include additional information? This paper seeks to shed light on this question by testing the usefulness of the FOMC's own forecasts. Twice a year, the FOMC makes forecasts of major macroeconomic variables. FOMC members have access to the staff forecasts when they prepare their forecasts. We find that the optimal combination of the FOMC and staff forecasts in predicting inflation and unemployment puts a weight of essentially zero on the FOMC forecast and essentially one on the staff forecast: the FOMC appears to have no value added in forecasting. The results for predicting real growth are less clear-cut. We also find statistical and narrative evidence that differences between the FOMC and staff forecasts help predict monetary policy shocks, suggesting that policymakers act in part on the basis of their apparently misguided information. |
| JEL: | E37 E52 E58 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13751&r=for |