JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Oxford University Press is collaborating with JSTOR to digitize, preserve and extend access to The Quarterly Professional forecasters may not simply aim to minimize expected squared forecast errors. In models with repeated forecasts the pattern of forecasts reveals valuable information about the forecasters even before the outcome is realized. Rational forecasters will compromise between minimizing errors and mimicking prediction patterns typical of able forecasters. Simple models based on this argument imply that forecasts are biased in the direction of forecasts typical of able forecasters. Our models of strategic bias are rejected empirically as forecasts are biased in directions typical of forecasters with large mean squared forecast errors. This observation is consistent with behavioral explanations of forecast bias. I. INTRODUCTION Can predictable errors in survey forecast data be explained by "rational cheating?" Forecasters in numerous studies analyzing survey data have been found to make predictable forecast errors. This finding can be interpreted as a rejection of rational expectations under the joint hypothesis that forecasters aim to minimize squared forecast errors.' However, as Scharfstein and Stein [1990], Trueman [1988], and Dow and Gorton [1994] haveargued, fully rational agents might choose to announce forecasts different from the conditional expected value of the variable to be predicted. This paper introduces and tests the implications of advising games played by advisers (or interchangeably forecasters) and their clients. The predictions of these models enable us to test them against behavioral explanations of the observed bias in forecasts.Advisers in our advising games make repeated forecasts of the same realization of the same variable. Hence clients can estimate an adviser's ability before the realization of the variable. *We would like to thank

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