Effects of feedback on probabilistic forecasts of stock prices

Dilek Önkal*, Gulnur Muradoǧlu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

This paper reports the results of an experiment in stock-price forecasting that investigated the effects of feedback on various dimensions of probability forecasting accuracy. Three types of feedback were used: (1) simple outcome feedback, (2) outcome feedback presented in the task format, and (3) performance feedback in the form of an overall accuracy score in addition to detailed calibration information. While calibration improved for all the feedback groups, forecasters' skill was found to improve only for the task-formated outcome feedback and performance feedback groups (but not for the simple outcome feedback group). Finally, the forecasters in the performance feedback group also improved their mean slope and mean probability scores, an effect not observed in the other feedback groups. It is suggested that, in a dynamic environment like the stock market, probability forecasting offers distinct advantages by providing an important channel of communication between the forecasters and the users of financial information.

Original languageEnglish
Pages (from-to)307-319
Number of pages13
JournalInternational Journal of Forecasting
Volume11
Issue number2
DOIs
Publication statusPublished - 1 Jan 1995

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