Overreaction in Macroeconomic Expectations

@inproceedings{Bordalo2017OverreactionIM,
  title={Overreaction in Macroeconomic Expectations},
  author={Pedro Bordalo and Nicola Gennaioli and Yueran Ma and Andrei Shleifer},
  year={2017}
}
We examine the rationality of individual and consensus professional forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), which focuses on the predictability of forecast errors from earlier forecast revisions. We document two principal findings: at the individual level, forecasters typically over-react to information, while consensus forecasts exhibit under-reaction. To reconcile these findings, we combine the diagnostic expectations model… CONTINUE READING

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