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Is Knowledge Cursed When Forecasting the Forecasts of Others?

Chuah, S-H ORCID: 0000-0002-4562-1340, Hoffmann, R, Liu, B and Tan, M 2019 , 'Is Knowledge Cursed When Forecasting the Forecasts of Others?' , The Journal of Behavioral Finance, vol. 20, no. 1 , pp. 66-72 , doi: 10.1080/15427560.2018.1464454.

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Abstract

Financial decision makers (lenders, insurers, advisees) often need to estimate how well others makedecisions. Is knowledge a blessing or a curse when forecasting others’ forecast accuracy? Theauthors show that this depends on its type. Within a single experimental setting, they identify andtest 4 distinct information types that have different effects on forecast accuracy. First, the authorsrevisit the well-known “curse of knowledge” and show that it may have resulted from entirelyarbitrary, uninformative anchors. Second, we show that in contrast, genuinely informative cuespurged of anchoring potential enhance estimation accuracy. Third, richer, more detailed financialinformation has no effect even for participants better able to interpret it. Fourth, domain experts donot overimpute others’ forecast ability. The authors conclude that in financial settings knowledgemay be a blessing or a curse, or have no effect depending on its type.

Item Type: Article
Authors/Creators:Chuah, S-H and Hoffmann, R and Liu, B and Tan, M
Keywords: forecasting of forecasts, curse of knowledge, information, anchoring, hindsight bias, overimputation, expertise
Journal or Publication Title: The Journal of Behavioral Finance
Publisher: Routledge
ISSN: 1542-7560
DOI / ID Number: 10.1080/15427560.2018.1464454
Copyright Information:

© 2018 The Institute of Behavioral Finance

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