TY - UNPD A1 - Félix, Luiz A1 - Kräussl, Roman A1 - Stork, Philip T1 - Predictable biases in macroeconomic forecasts and their impact across asset classes T2 - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 596 N2 - This paper investigates how biases in macroeconomic forecasts are associated with economic surprises and market responses across asset classes around US data announcements. We find that the skewness of the distribution of economic forecasts is a strong predictor of economic surprises, suggesting that forecasters behave strategically (rational bias) and possess private information. Our results also show that consensus forecasts of US macroeconomic releases embed anchoring. Under these conditions, both economic surprises and the returns of assets that are sensitive to macroeconomic conditions are predictable. Our findings indicate that local equities and bond markets are more predictable than foreign markets, currencies and commodities. Economic surprises are found to link to asset returns very distinctively through the stages of the economic cycle, whereas they strongly depend on economic releases being inflation- or growth-related. Yet, when forecasters fail to correctly forecast the direction of economic surprises, regret becomes a relevant cognitive bias to explain asset price responses. We find that the behavioral and rational biases encountered in US economic forecasting also exists in Continental Europe, the United Kingdom and Japan, albeit, to a lesser extent. T3 - CFS working paper series - 596 KW - Anchoring KW - rational bias KW - economic surprises KW - predictability KW - stocks KW - bonds KW - currencies KW - commodities KW - machine learning Y1 - 2018 UR - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/46978 UR - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-469789 UR - https://www.ifk-cfs.de/fileadmin/downloads/publications/wp/2018/CFS_WP_596.pdf IS - June 2018 PB - Center for Financial Studies CY - Frankfurt, M. ER -