Forecasting with Financial Market Survey Data

Background

In close collaboration with the Center for European Economic Research (ZEW) in Mannheim, an examination of the forecasting behavior of experts with respect to financial markets and macroeconomic time series is being explored. Since 1991, the ZEW has been collecting monthly data of expected developments of major financial time series (interest rates, stock indices, exchange rates, inflation, business cycle appraisals) by means of qualitative surveys. The surveys are only sent to so-called experts - employees in finance departments of banks, insurances and industrial companies. The monthly forecasts are partly broadcasted via the German TV station N-TV and provide an important decision-making basis for brokers and stock traders. The publication of the business cycle appraisals has obtained popularity comparable to the "Geschäftsklimaindex" from the Ifo-Institue in Munich.

Project Description

The research project exhaustively deals with the analysis of the forecasting procedures with respect to optimal quantification of the qualitative survey data. Thereby forecasts based on quantal response models are compared to forecasts based on time series models. Further questions cope with evaluation of the optimal forecast period, detection of break points in the underlying time series, and rationality of the forecasting behavior of professional forecasters.