Niu, Xiaoxiao;
Harvey, Nigel;
(2022)
Outcome feedback reduces over-forecasting of inflation and overconfidence in forecasts.
Judgment and Decision Making
, 17
(1)
pp. 124-163.
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Abstract
Survey respondents over-forecast inflation: they expect it to be higher than it turns out to be. Furthermore, people are generally overconfident in their forecasts. In two experiments, we show that providing outcome feedback that informs people of the actual level of the inflation that they have forecast reduces both over-forecasting and overconfidence in forecasts. These improvements were preserved even after feedback had been withdrawn, a finding that indicates that they were not produced because feedback had a temporary incentive effect but because it had a more permanent learning effect. However, providing forecasters with more outcome feedback did not have a greater effect. Feedback appears to provide people with information about biases in their judgments and, once they have received that information, no additional advantage is obtained by giving it to themagain. Reducing over-forecasting also had no clear effect on overall error. This was because providing outcome feedback after every judgment also affected the noise or random error in forecasts, increasing it by a sufficient amount to cancel out the benefits provided by the reduction in over-forecasting.
| Type: | Article |
|---|---|
| Title: | Outcome feedback reduces over-forecasting of inflation and overconfidence in forecasts |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | http://journal.sjdm.org/vol17.1.html |
| Language: | English |
| Additional information: | This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third-party material in this article are included in the Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/ |
| Keywords: | Over-forecasting, overconfidence, feedback, judgment noise, inflation surveys, inflation expectations |
| UCL classification: | UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences > Div of Psychology and Lang Sciences > Experimental Psychology UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences UCL UCL > Provost and Vice Provost Offices > School of Life and Medical Sciences > Faculty of Brain Sciences > Div of Psychology and Lang Sciences |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10142893 |
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