The influence of trend strength on directional probabilistic currency predictions

Mary E. Thomson*, Dilek Önkal-Atay, Andrew C. Pollock, Alex Macaulay

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

An experiment is reported which compares the judgmental forecasting performance of experts and novices using simulated currency series with differing trend strengths. Analyses of directional probability forecasts reveal: (1) significant effects of trend strength on all aspects of predictive performance being studied, with evidence for the hard-easy effect where overconfidence is exhibited on weak (i.e., more difficult) trends, while underconfidence is shown on strong (i.e., less difficult) trends; (2) lower performance of experts on relative accuracy and profitability measures, reflecting experts' resistance to strong trends; (3) better overall performance on negative trends; and (4) superior performance of composite forecasts. Possible explanations are offered for these results and future research directions are outlined.

Original languageEnglish
Pages (from-to)241-256
Number of pages16
JournalInternational Journal of Forecasting
Volume19
Issue number2
Early online date22 Nov 2002
DOIs
Publication statusPublished - Apr 2003
Externally publishedYes

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