Predicting Market Movers: A Closer Look at Consensus Estimates

Moersch, Mathias
April 2001
Business Economics;Apr2001, Vol. 36 Issue 2, p24
Academic Journal
Market movers are releases of data or news that lead to price adjustments in financial markets. It is common practice to treat consensus forecasts of market movers as a measure of the information known to the market prior to such an announcement. Any deviation of the announcement from the consensus is interpreted as new information that leads to price adjustments in financial markets. Despite their importance for financial markets, these short-term consensus forecasts of market movers have not been studied systematically to date. An assessment of forecasts for ten monthly macroeconomic time series in the United States from 1994 until 1999 reveals that only half of the forecasts can be characterized as unbiased. Inflation forecasts in particular show a tendency to over-predict actual price increases during the sample period. At the same time two simple forecasting rules are clearly inferior to the consensus forecasts in all cases considered.


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