Predictive Behavior

This book describes a series of laboratory experiments (witha total of 167 independent subjects) on forecastingbehavior. In all experiments, the time series to beforecasted was generated by an abstract econometric modelinvolving two or three artificial exogenous variables. Thisdesignprovides an optimal background for rationalexpectations and least-squares learning. As expected, thesehypotheses do not explain observed forecasting behaviorsatisfactorily. Some phenomena related to this lack ofrationality are studied: Concentration on changes ratherthan levels, underestimation of changes and overvaluation ofvolatile exogenous variables. Some learning behavior isobserved. Finally, some aspects of individual forecasts suchas prominence of "round" number, dispersion, etc. , arestudied.

0. Literature Review. - 0. 1 Empirical Studies and Experimental Studies. - 0. 2 Hypotheses to Be Tested. - 0. 3 Description of Selected Empirical Studies. - 0. 4 Description of Selected Experimental Studies. - 0. 5 Concluding Comments on the Literature. - 1. Rationality in Presence of Exogenous Variables. - 1. 1 Fully Rational and Least-Squares-Learning Predictions. - 1. 2 Predictions Based on Misspecified Models. - 2. Experimental Design and Notation. - 2. 1 Experimental Design. - 2. 2 Notation. - 3. Aggregate Forecasts. - 3. 1 Forecast Error and Deviations from Rational Predictions. - 3. 2 Least-Squares Learning. - 3. 3 Some Non-Rational Features of Forecasts. - 3. 4 Trend-Underestimating Predictions . - 3. 5 Learning Behavior? . - 3. 6 The Influence of Single Variables. - 3. 7 Psychological Factors. - 3. 8 Concluding Remarks on Average Forecasts. - 4. Sum Results on Individual Forecasts. - 4. 1 Comparison to Various Prediction Concepts. - 4. 2 Non-Rational Features of Forecasts. - 4. 3 Learning Behavior. - 4. 4 Regression on Single Exogenous Variables. - 4. 5 Psychological Factors. - 5. Features of Individual Forecasts. - 5. 1 The Questionnaires. - 5. 2 Categories of Individual Forecasts. - 5. 3 Preference for Round Numbers. - 5. 4 The Time Spent for Forecasting. - 5. 5 The Dispersion of Forecasts. - 6. Conclusion. - 7. Appendix. - 7. 1 Mean Absolute Deviations from Various Prediction Concepts. - 7. 2 Regression on Single Exogenous Variables. - 8. References.