An Experimental Examination of the Effects of Forecast Bias on Individuals' Use of Forecasted Information

Posted: 6 Nov 1996

See all articles by Lucy F. Ackert

Lucy F. Ackert

Kennesaw State University - Michael J. Coles College of Business

Bryan K. Church

Georgia Institute of Technology - Accounting Area

Mohamed Shehata

McMaster University - Michael G. DeGroote School of Business

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Abstract

We conduct two sets of experiments to examine whether forecast bias affects individuals' willingness to acquire forecasted information and their abilities to use such information, recognizing that the two aspects are intertwined. The results indicate that individuals continue to acquire forecasted information as long as the information has little or no bias. As demand persists, individuals learn to use the information, which enables them to generate superior profit. In contrast, individuals are much less willing to continue acquiring extremely biased forecasts, particularly when predicting prices, perhaps because they perceive that the information is not useful.

JEL Classification: C91, D83

Suggested Citation

Ackert, Lucy F. and Church, Bryan K. and Shehata, Mohamed, An Experimental Examination of the Effects of Forecast Bias on Individuals' Use of Forecasted Information. Available at SSRN: https://ssrn.com/abstract=2795

Lucy F. Ackert (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Department of Economics and Finance
Kennesaw, GA 30144
United States
770-423-6111 (Phone)
770-499-3209 (Fax)

Bryan K. Church

Georgia Institute of Technology - Accounting Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-3907 (Phone)
404-894-6030 (Fax)

Mohamed Shehata

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-525-9140 (Phone)
905-521-8995 (Fax)

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