Ranking Professional Forecasters in an Unbalanced Panel: A New Approach

A large number of professional forecasters (in some cases, more than 70) submit their forecasts for a number of macro variables to Bloomberg. The variables include things like GDP, unemployment, commodity prices and many other economic and financial indicators. Founded in 1982, Bloomberg is one of the most respected sources of business and financial information in the world. With over 15,000 employees in 192 locations, they deliver information, news and insight around the world through innovative technology. Based on these forecasts every year, Bloomberg generates a list of top (most accurate) forecasters of different variables. Having accurate forecasts means a great deal to professional forecasters because that provides opportunities for their firms to increase profit or reduce losses. In addition, many businesses use the Bloomberg consensus as a proxy for market expectations. Many studies show that macroeconomic forecasts of key variables have an announcement effect on asset prices and financial markets. This is also known as a “signal effect,” whereby investors react to changes in these consensus forecasts. But the effect is more significant when the actual releases ...