Are household subjective forecasts of personal finances accurate and useful? A directional analysis of the British Household Panel Survey

• Published in: Journal of forecasting Vol. 28; no. 8; pp. 667 - 680
• Main Authors: Easaw, Joshy, Heravi, Saeed
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01.12.2009; Wiley Periodicals Inc
• Subjects: Accuracy; directional analysis; Economic forecasts; Economic psychology; forecast evaluation; Forecasting techniques; Household economics; Household expenditure; Household income; Households; Personal finance; Studies; subjective forecasts; survey data; United Kingdom; United Kingdom > UK
• ISSN: 0277-6693; 1099-131X
• DOI: 10.1002/for.1114

The purpose of the paper is to analyse the accuracy and usefulness of household subjective forecasts of personal finance. We use non‐parametric directional analysis to assess the subjective forecasts which are based on qualitative judgments. Using the British Household Panel Survey (BHPS) we are able to analyse a large number of individuals over a number of years. We also take into account individual characteristics such as gender, age, education and employment status when assessing their subjective forecasts. The paper extends the existing literature in two ways: the accuracy and usefulness of subjective forecasts, based on directional analysis, are assessed at the household level for the first time. Secondly, we adapt and extend the methods of directional analysis, which are applied to the household panel or longitudinal survey. Copyright © 2008 John Wiley & Sons, Ltd.