The accuracy of interest rate forecasts in the Asia-Pacific region: opportunities for portfolio management

Filiz, Ibrahim; Nahmer, Thomas; Spiwoks, Markus; Bizer, Kilian

doi:10.1080/00036846.2019.1616073

Cited by 9 publications

(12 citation statements)

References 48 publications

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“…Generally, Blue Chip survey participants underpredict interest rates in the short run, while they overpredict them in the long run. Our empirical findings are generally consistent with existing empirical literature regarding short-term rates predictability (Chun 2012) but differ from existing evidence on long-term interest rates (Filiz et al , 2019) as we show that survey-based forecasts are also efficient in predicting long-term interest rates in the long run. Third, regarding the other key macroeconomic variables under examination, we provide evidence that survey-based forecasts are among the most accurate predictors of key macroeconomic variables, in line with the existing literature (Baghestani, 2019).…”

Section: Discussionsupporting

confidence: 75%

“…The particular survey asks approximately 50 economic forecasters and financial professionals every month for their forecasts of interest rates and certain key macroeconomic variables for the current quarter and for one- to five-quarters ahead. Although the literature examining analysts' forecasts of macroeconomic indicators is not as deep as the literature for corporate earnings (Broughton and Lobo, 2018), the performance of professional survey-based forecasts has been the subject of a number of studies (indicatively see, Filiz et al (2019); Baghestani, 2019; Kunze, 2020 and the references therein). Existing research has not provided conclusive evidence, and this may be attributed to research design choices.…”

Section: Introductionmentioning

confidence: 99%

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Evaluating survey-based forecasts of interest rates and macroeconomic variables

Fassas

Papadamou

Kenourgios

2021

JES

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PurposeThis study examines the forecasting performance of the professional analysts participating in the Blue Chip Economic Indicators Survey using an alternative methodological research design.Design/methodology/approachThis work employs two methodologies, namely a panel specification, with the cross-section being the forecast horizon (from 1-month to 18-months ahead forecasts) and the time period being the time that the forecast was made and a quantile regression technique, which evaluates the hidden nonmonotonic relations between the forecasts and the target variables being forecasted.FindingsThe empirical findings of this study show that survey-based forecasts of certain key macroeconomic variables are generally biased but still efficient predictors of target variables. In particular, we find that survey participants are more efficient in predicting long-term interest rates in the long-run and short-term interest rates in the short run, while the predictability of medium-term interest rates is the least accurate. Finally, our empirical analysis suggests that currency fluctuations are very hard to predict in the short run, while we show that survey-based forecasts are among the most accurate predictors of GDP deflator and growth.Practical implicationsEvaluating the accuracy of economic forecasts is critical since market participants and policymakers utilize such data (as one of several inputs) for making investment, financial and policy decisions. Therefore, the quality of a decision depends, in part, on the quality of the forecast. Our empirical results should have immediate implications for asset pricing models that use interest rates and inflation forecasts as variables.Originality/valueThe present study marks a methodological departure from existing empirical attempts as it proposes a simpler yet powerful approach in order to investigate the efficiency of professional forecasts. The employed empirical specifications enable market participants to investigate the information content of forecasts over different forecast horizons and the temporal evolution of forecast quality.

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Section: Discussionsupporting

confidence: 75%

Section: Introductionmentioning

confidence: 99%

Evaluating survey-based forecasts of interest rates and macroeconomic variables

Fassas

Papadamou

Kenourgios

2021

JES

View full text Add to dashboard Cite

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“…The actual success of stock market forecasts is thus best checked against real ex-ante forecasts. In the area of interest rate forecasts, the evaluation of continuously published forecasts has a long tradition (Filiz et al 2021;Fassas et al 2021;Filiz et al 2019;Kunze et al 2017;Miah et al 2016;Pierdzioch 2015;Baghestani et al 2015;Oliver and Pasaogullari 2015;Spiwoks et al 2015). In the area of stock market forecasting, however, there are only a small number of studies that check continuously published stock market forecasts for their reliability (see the synoptic overview in Table 1).…”

Section: Ex-ante Stock Market Forecastsmentioning

confidence: 99%

“…This phenomenon is known as topically orientated trend adjustment (Andres and Spiwoks 1999). It occurs equally in share price forecasts, interest rate forecasts, exchange rate forecasts, and commodity price forecasts (see, e.g., Filiz et al 2019;Kunze et al 2018;Spiwoks et al 2015;Spiwoks and Hein 2007). A tendency to underestimate the variability of reality could be an important cause (Spiwoks et al 2015).…”

Section: Introductionmentioning

confidence: 99%

Sticky Stock Market Analysts

Filiz

Judek

Lorenz

et al. 2021

JRFM

Self Cite

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Technological progress in recent years has made new methods available for making forecasts in a variety of areas. We examine the success of ex-ante stock market forecasts of three major stock market indices, i.e., the German Stock Market Index (DAX), the Dow Jones Industrial Index (DJI), and the Euro Stoxx 50 (SX5E). We test whether the forecasts prove true when they reach their effective dates and are therefore suitable for active investment strategies. We revive the thoughts of the American sociologist William Fielding Ogburn, who argues that forecasters consistently underestimate the variability of the future. In addition, we draw on some contemporary measures of forecast quality (prediction-realization diagram, test of unbiasedness, and Diebold–Mariano test). We reveal that (a) unusual events are underrepresented in the forecasts, (b) the dispersion of the forecasts lags behind that of the actual events, (c) the slope of the regression lines in the prediction-realization diagram is <1, (d) the forecasts are highly biased, and (e) the quality of the forecasts is not significantly better than that of naïve forecasts. The overall behavior of the forecasters can be described as “sticky” because their forecasts adhere too strongly to long-term trends in the indices and are thus characterized by conservatism.

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“…Kunze and Gruppe, 2014; Chortareas et al , 2012) and Asia–Pacific (cf. Filiz et al , 2019; Jongen et al , 2011) were already part of prior research, this study is the first to examine the Latin American Consensus Forecasts database.…”

Section: Introductionmentioning

confidence: 99%

Interest rate forecasts in Latin America

Filiz

Judek

Lorenz

et al. 2021

JES

Self Cite

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PurposeThis paper aims to assess the quality of interest rate forecasts for the money markets in Argentina, Brazil, Chile, Mexico and Venezuela for the period between 2001 and 2019. Future interest rate trends are of key significance for many business-related decisions. Thus, reliable interest rate forecasts are essential, for example, for banks that make profits by carrying out maturity transformations.Design/methodology/approachThe data that we analyze were collected by Consensus Economics through a monthly survey with over 120 renowned economists and were published between 2001 and 2019 in the journal Latin American Consensus Forecasts. The authors use the Diebold-Mariano test, the sign accuracy test, the TOTA coefficient and the unbiasedness test to determine the precision and biasedness of the forecasts.FindingsThe research reveals that the forecasting work carried out in Brazil, Chile and Mexico is remarkably successful. The quality of forecasts from Argentina and Venezuela, on the other hand, is significantly poorer.Originality/valueOver 50 studies have already been published with regard to the accuracy of interest rate forecasts, emphasizing the importance of the topic. However, interest rate forecasts for Latin American money markets have hardly been considered thus far. The paper closes this research gap. Overall, the analyzed database amounts to a total of 209 forecast time series with 28,451 individual interest rate forecasts. This study is thus far more comprehensive than all previous studies.

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The accuracy of interest rate forecasts in the Asia-Pacific region: opportunities for portfolio management

Cited by 9 publications

References 48 publications

Evaluating survey-based forecasts of interest rates and macroeconomic variables

Evaluating survey-based forecasts of interest rates and macroeconomic variables

Sticky Stock Market Analysts

Interest rate forecasts in Latin America

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