Strategic bias, herding behaviour and economic forecasts

Professional forecasters can have other objectives as well as minimizing expected squared forecast errors. This paper studies whether the people or companies which make forecasts behave strategically with the aim of maximizing aspects such as publicity, salary or their prestige, or more generally to minimize some loss function; or whether, on the contrary, they make forecasts which resemble consensus forecasts (herding behaviour). This study also analyses whether, as forecasters gain more reputation and experience, they make more radical forecasts, that is, they deviate further from the consensus. For this the Livingston Survey is used, a panel of experts who make forecasts on the future evolution of the United States economy.