Template-type: ReDIF-Paper 1.0
Author-Name: Philip Hans Franses
Author-Email: franses@few.eur.nl
Author-Person: pfr38
Author-Workplace-Name: Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam
Author-Name: Chia-Lin Chang
Author-Email: changchialin@nchu.edu.tw
Author-Person: pch286
Author-Workplace-Name: Department of Applied Economics, Department of Finance, National Chung Hsing University
	Taichung, Taiwan
Author-Name: Michael McAleer
Author-Person: pmc90
Author-Workplace-Name: Econometrisch Instituut (Econometric Institute), Faculteit der Economische
	Wetenschappen (Erasmus School of Economics), Erasmus Universiteit, Tinbergen Instituut (Tinbergen Institute).
Title: Analyzing Fixed-event Forecast Revisions
Abstract: It is common practice to evaluate fixed-event forecast revisions in macroeconomics by regressing 
	current revisions on one-period lagged revisions. Under weak-form efficiency, the correlation between 
	the current and one-period lagged revisions should be zero. The empirical findings in the literature 
	suggest that the null hypothesis of zero correlation between the current and one-period lagged revisions 
	is rejected quite frequently, where the correlation can be either positive or negative. In this paper we 
	propose a methodology to be able to interpret such non-zero correlations in a straightforward manner. Our 
	approach is based on the assumption that forecasts can be decomposed into both an econometric model and 
	expert intuition. The interpretation of the sign of the correlation between the current and one-period 
	lagged revisions depends on the process governing intuition, and the correlation between intuition and 
	news.
Classification-JEL: C22, C53, E27, E37.
Keywords: Evaluating forecasts, Macroeconomic forecasting, Rationality, Intuition, Weak-form efficiency, 
	Fixed-event forecasts.
Note: The authors are grateful for the helpful comments and suggestions of seminar participants at Complutense 
	University of Madrid. For financial support, the second author acknowledges the National Science Council, 
	Taiwan, and the third author wishes to thank the Australian Research Council, National Science Council, 
	Taiwan, and the Japan Society for the Promotion of Science.
Length: 20 pages
Creation-Date: 2011
Number: 2011-24
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1124.txt
File-URL: https://eprints.ucm.es/id/eprint/12883/1/1124.pdf
File-Format: Application/pdf
File-Function: june 2011
Handle: RePEc:ucm:doicae:1124