Forecasting foreign exchange rates as group experiment: actuality bias and fact-convergence effect within wisdom of crowds

IF 1.9 Q2 BUSINESS, FINANCE Review of Behavioral Finance Pub Date : 2022-03-14 DOI:10.1108/rbf-09-2021-0176
Haruo H. Horaguchi
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Abstract

PurposeThis article examines the accuracy and bias inherent in the wisdom of crowd effect. The purpose is to clarify what kind of bias crowds have when they make predictions. In the theoretical inquiry, the effect of the accumulated absolute deviation was simulated. In the empirical study, the observed biases were examined using data from forecasting foreign exchange rates.Design/methodology/approachIn the theoretical inquiry, the effect of the accumulated absolute deviation was simulated based on mathematical propositions. In the empirical study, the data from 2004 to 2011 were provided by Nikkei, which holds the “Nikkei Yen Derby” competition. In total, 3,657 groups forecasted the foreign exchange rate, and the first prediction was done in early May to forecast the rate at the end of May. The second round took place in June in a similar manner.FindingsThe average absolute deviation in May was smaller than that in June. The first round of prediction was more accurate than the second round one. Predictors were affected by the observable real exchange rate, such that they modified their forecasts by referring to the actual data in early June. An actuality bias existed when the participants lost their diverse prospects. Since the standard deviations of the June forecasts were smaller than those of May, the fact-convergence effect was supported.Originality/valueThis article reports novel findings that affect the wisdom of crowd effect—referred to as actuality bias and fact-convergence effect. The former refers to a forecasting bias toward the observable rate near the forecasting date. The latter implies that predictors, as a whole, indicate smaller forecast deviations by observing the realized foreign exchange rate.
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作为群体实验的汇率预测:群体智慧中的现实偏差与事实趋同效应
目的研究群体智慧效应中固有的准确性和偏差。其目的是澄清群体在做出预测时会有什么样的偏见。在理论探讨中,模拟了累积绝对偏差的影响。在实证研究中,使用预测外汇汇率的数据来检验观察到的偏差。设计/方法/途径在理论探究中,基于数学命题模拟了累积绝对偏差的影响。在实证研究中,2004 - 2011年的数据由举办“日经日元德比”大赛的日经提供。预测汇率的团体共有3657个,其中第一次预测是在5月初进行的,目的是预测5月末的汇率。第二轮选举在6月以类似的方式进行。5月份的平均绝对偏差小于6月份。第一轮预测比第二轮预测更准确。预测者受到可观察到的实际汇率的影响,因此他们参照6月初的实际数据修改了自己的预测。当参与者失去了他们多样化的前景时,就存在现实偏见。由于6月份预测的标准差小于5月份,因此支持事实收敛效应。原创性/价值本文报道了影响群体智慧效应的新发现,即现实偏差和事实趋同效应。前者是指在预测日期附近对可观测率的预测偏差。后者意味着预测者,作为一个整体,通过观察已实现的外汇汇率来表明较小的预测偏差。
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来源期刊
Review of Behavioral Finance
Review of Behavioral Finance BUSINESS, FINANCE-
CiteScore
4.70
自引率
5.00%
发文量
44
期刊介绍: Review of Behavioral Finance publishes high quality original peer-reviewed articles in the area of behavioural finance. The RBF focus is on Behavioural Finance but with a very broad lens looking at how the behavioural attributes of the decision makers influence the financial structure of a company, investors’ portfolios, and the functioning of financial markets. High quality empirical, experimental and/or theoretical research articles as well as well executed literature review articles are considered for publication in the journal.
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