Is Knowledge Cursed When Forecasting the Forecasts of Others

Chuah, S, Hoffmann, R, Liu, B and Tan, M 2019, 'Is Knowledge Cursed When Forecasting the Forecasts of Others', Journal of Behavioral Finance, vol. 20, no. 1, pp. 66-72.


Document type: Journal Article
Collection: Journal Articles

Title Is Knowledge Cursed When Forecasting the Forecasts of Others
Author(s) Chuah, S
Hoffmann, R
Liu, B
Tan, M
Year 2019
Journal name Journal of Behavioral Finance
Volume number 20
Issue number 1
Start page 66
End page 72
Total pages 7
Publisher Routledge
Abstract Financial decision makers (lenders, insurers, advisees) often need to estimate how well others make decisions. Is knowledge a blessing or a curse when forecasting others' forecast accuracy? The authors show that this depends on its type. Within a single experimental setting, they identify and test 4 distinct information types that have different effects on forecast accuracy. First, the authors revisit the well-known "curse of knowledge" and show that it may have resulted from entirely arbitrary, uninformative anchors. Second, we show that in contrast, genuinely informative cues purged of anchoring potential enhance estimation accuracy. Third, richer, more detailed financial information has no effect even for participants better able to interpret it. Fourth, domain experts do not overimpute others' forecast ability. The authors conclude that in financial settings knowledge may be a blessing or a curse, or have no effect depending on its type.
Subject Experimental Economics
Finance
Keyword(s) Forecasting of forecasts
Curse of knowledge
Information
Anchoring
Hindsight bias
Overimputation
Expertise
DOI - identifier 10.1080/15427560.2018.1464454
Copyright notice © 2018 The Institute of Behavioral Finance
ISSN 1542-7560
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