Expectations, use and judgmental adjustment of external financial and economic forecasts: an empirical investigation

Abstract

A survey of 124 users of externally produced financial and economic forecasts in Turkey investigated their expectations and perceptions of forecast quality and their reasons for judgmentally adjusting forecasts. Expectations and quality perceptions mainly related to the timeliness of forecasts, the provision of a clear justifiable rationale and accuracy. Cost was less important. Forecasts were frequently adjusted when they lacked a justifiable explanation, when the user felt they could integrate their knowledge into the forecast, or where the user perceived a need to take responsibility for the forecast. Forecasts were less frequently adjusted when they came from a well-known source and were based on sound explanations and assumptions. The presence of feedback on accuracy reduced the influence of these factors. The seniority and experience of users had little effect on their attitudes or propensity to make adjustments. Copyright © 2008 John Wiley & Sons, Ltd.

The relative influence of advice from human experts and statistical methods on forecast adjustments

“…In all cases, participants were informed in advance of the apparent source of the advice they would be receiving, a situation which is likely to apply in many practical contexts (Gönül, Ö nkal, & Goodwin, 2009). This may account for the inferior calibration of the initial prediction intervals of the expertframing group in Study 1.…”

Do Experts' SKU Forecasts Improve after Feedback?

“…Furthermore, in the Principles of Forecasting Handbook (Armstrong, 2001;Armstrong and Pagell, 2003) two of the principles, identified by 40 international studies to increase forecast quality, state that forecasting methods should be compared on their past performance and feedback on forecasts should be sought (see also www.forecastingprinciples.com). Interestingly, Fildes et al (2009) and Gönül et al (2009) find in their surveys that these principles are not often followed. In fact, of the respondents only 75% and 35.5%, respectively, indicated to use performance feedback.…”

“…In fact, of the respondents only 75% and 35.5%, respectively, indicated to use performance feedback. Gönül et al (2009) further investigate the reasons for adjusting externally acquired financial and economic forecasts. Getting performance feedback on the external forecasts is shown to result in more adjustments and in lesser reliance on other factors to determine whether to adjust (such as information on the source of the forecasts).…”

Scenarios as channels of forecast advice

“…In corporate practice, managers commonly use their judgment to adjust the statistical baseline forecasts [2,6,7], to the extent that there may actually be layers of adjustments by forecast users at different levels of decision making [8]. How the users accept or modify given forecasts (regardless of whether this information is presented through models or experts) presents an important issue for researchers investigating advice taking [9].…”