Do Macroforecasters Herd?

We show that typical tests of whether forecasters herd will falsely indicate herding behavior for a variety of types of behavior and forecasting environments that give rise to disagreement among forecasters. We establish that forecasters will appear to herd if differences between them reflect noise...

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Bibliographic Details
Published inJournal of money, credit and banking Vol. 50; no. 2/3; pp. 265 - 292
Main Author CLEMENTS, MICHAEL P.
Format Journal Article
LanguageEnglish
Published Columbus Wiley Subscription Services 01.03.2018
Ohio State University Press
Subjects
(anti‐)herding
Behavior
E37
Economic forecasts
Forecasting
idiosyncratic errors
Inflation
macroforecasting
Noise
private information
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Summary:We show that typical tests of whether forecasters herd will falsely indicate herding behavior for a variety of types of behavior and forecasting environments that give rise to disagreement among forecasters. We establish that forecasters will appear to herd if differences between them reflect noise as opposed to private information, or if they arise from informational rigidities. Noise can have a behavioral interpretation and if so will depend on the behavioral model under consideration. An application of the herding tests to U.S. quarterly survey forecasts of inflation and output growth data 1981–2013 does not support herding behavior.
Bibliography:The computations were undertaken using code written in Gauss 14, Aptech Systems. I am grateful for constructive comments from two reviewers that led to marked improvements in the paper. This paper has also benefited from the comments of participants at the ECB‐CFS‐Bundesbank Joint Lunchtime Seminar, and the Warwick‐Monash Workshop on Macroforecasting. An earlier version of this paper was circulated as “Assessing the Evidence for Macroforecaster Herding: Forecasts of Inflation and Output Growth.”
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.12460