Forecasting Efficiency: Concepts and Applications

Abstract

This article introduces the concept of forecast efficiency, in which the forecast contains all information available at the time of the forecast. Empirical tests investigate weak efficiency, where the information set is all past forecasts and where all forecast revisions and errors should be uncorrelated with past forecast revisions. Tests of macroeconomic, energy-consumption, and oil-price forecasts find a significant autocorrelation of forecast revisions, with fifty of fifty-one tests showing positive correlation of forecast revisions, as opposed to zero correlation consistent with forecast efficiency. Copyright 1987 by MIT Press.

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