This paper studies what professional forecasters predict. We use spectral analysis and state space modeling to decompose economic time series into trend, business cycle, and irregular components. We examine which components are captured by professional forecasters by regressing their forecasts on the estimated components extracted from both the spectral analysis and the state space model. For both decomposition methods, we find that, in the short run, the Survey of Professional Forecasters can predict almost all of the variation in the time series due to the trend and the business cycle, but that the forecasts contain little or no significant information about the variation in the irregular component.

Additional Metadata
Keywords Baxter-King filter, Expert forecast, Forecast evaluation, State space modeling, Survey of professional forecasters, Trend-cycle decomposition
Persistent URL dx.doi.org/10.1016/j.ijforecast.2017.12.004, hdl.handle.net/1765/104806
Journal International Journal of Forecasting
Citation
Nibbering, D, Paap, R, & van der Wel, M. (2018). What do professional forecasters actually predict?. International Journal of Forecasting, 34(2), 288–311. doi:10.1016/j.ijforecast.2017.12.004