Is Knowledge Cursed When Forecasting the Forecasts of Others?

Chuah, Swee-Hoon, Hoffmann, Robert, Liu, Bin, and Tan, Monica (2019) Is Knowledge Cursed When Forecasting the Forecasts of Others? Journal of Behavioral Finance, 20 (1). pp. 66-72.

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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.

Item ID: 72736
Item Type: Article (Research - C1)
ISSN: 1542-7579
Copyright Information: © 2018 The Institute of Behavioral Finance
Date Deposited: 03 Aug 2022 02:40
FoR Codes: 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350202 Finance @ 50%
38 ECONOMICS > 3801 Applied economics > 380102 Behavioural economics @ 50%
SEO Codes: 11 COMMERCIAL SERVICES AND TOURISM > 1102 Financial services > 110201 Finance services @ 100%
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