Professional vs. amateur judgment accuracy: The case of foreign exchange rates

Professional vs. amateur judgment accuracy: The case of foreign exchange rates Highly knowledgeable people often fail to achieve highly accurate judgments, a phenomenon sometimes called the “process-performance paradox.” The present research tested for this paradox in foreign exchange (FX) rate forecasting. Forty professional and 57 sophisticated amateur forecasters made one-day and one-week-ahead FX predictions in deterministic and probabilistic formats. Among the conclusions indicated by the results are: (a) professional accuracy usually surpasses amateur accuracy, although many amateurs outperform many professionals; (b) professionals appear to achieve high proficiency via heavy reliance on predictive information (unlike what has been observed before, e.g., for stock prices); (c) forecast format strongly affects judgment accuracy and processes; and (d) apparent overconfidence can transform itself into underconfidence depending on when and how forecasters must articulate their confidence. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Organizational Behavior and Human Decision Processes Elsevier

Professional vs. amateur judgment accuracy: The case of foreign exchange rates

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Publisher
Elsevier
Copyright
Copyright © 2003 Elsevier Science (USA)
ISSN
0749-5978
DOI
10.1016/S0749-5978(03)00058-X
Publisher site
See Article on Publisher Site

Abstract

Highly knowledgeable people often fail to achieve highly accurate judgments, a phenomenon sometimes called the “process-performance paradox.” The present research tested for this paradox in foreign exchange (FX) rate forecasting. Forty professional and 57 sophisticated amateur forecasters made one-day and one-week-ahead FX predictions in deterministic and probabilistic formats. Among the conclusions indicated by the results are: (a) professional accuracy usually surpasses amateur accuracy, although many amateurs outperform many professionals; (b) professionals appear to achieve high proficiency via heavy reliance on predictive information (unlike what has been observed before, e.g., for stock prices); (c) forecast format strongly affects judgment accuracy and processes; and (d) apparent overconfidence can transform itself into underconfidence depending on when and how forecasters must articulate their confidence.

Journal

Organizational Behavior and Human Decision ProcessesElsevier

Published: Jul 1, 2003

References

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