Article ID: | iaor201110169 |
Volume: | 57 |
Issue: | 10 |
Start Page Number: | 1827 |
End Page Number: | 1843 |
Publication Date: | Oct 2011 |
Journal: | Management Science |
Authors: | Siemsen Enno, Kremer Mirko, Moritz Brent |
Keywords: | behaviour |
We analyze how individuals make forecasts based on time‐series data. Using a controlled laboratory experiment, we find that forecasting behavior systematically deviates from normative predictions: Forecasters overreact to forecast errors in relatively stable environments, but underreact to errors in relatively unstable environments. The performance loss that is due to such systematic judgment biases is larger in stable than in unstable environments.