The influence of trend strength on directional probabilistic currency predictions

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

doi:10.1016/S0169-2070(01)00132-7

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 journal › Article › peer-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 language	English
Pages (from-to)	241-256
Number of pages	16
Journal	International Journal of Forecasting
Volume	19
Issue number	2
Early online date	22 Nov 2002
DOIs	https://doi.org/10.1016/S0169-2070(01)00132-7
Publication status	Published - Apr 2003
Externally published	Yes

Keywords

Exchange rate
Expertise
Forecasting
Judgement
Probability

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10.1016/S0169-2070(01)00132-7

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title = "The influence of trend strength on directional probabilistic currency predictions",

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.",

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AU - Thomson, Mary E.

AU - Önkal-Atay, Dilek

AU - Pollock, Andrew C.

AU - Macaulay, Alex

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Y1 - 2003/4

N2 - 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.

AB - 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.

KW - Exchange rate

KW - Expertise

KW - Forecasting

KW - Judgement

KW - Probability

UR - https://www.scopus.com/pages/publications/25844490312

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DO - 10.1016/S0169-2070(01)00132-7

M3 - Article

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SN - 0169-2070

VL - 19

SP - 241

EP - 256

JO - International Journal of Forecasting

JF - International Journal of Forecasting

IS - 2

ER -

The influence of trend strength on directional probabilistic currency predictions

Abstract

Keywords

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