Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

A new hedging hypothesis regarding prediction interval formation in stock price forecasting

Zhu, Dan, Wang, Qingwei ORCID: https://orcid.org/0000-0002-3695-7846 and Goddard, John 2022. A new hedging hypothesis regarding prediction interval formation in stock price forecasting. Journal of Forecasting 41 (4) , pp. 697-717. 10.1002/for.2830

[thumbnail of manuscript.pdf] PDF - Accepted Post-Print Version
Download (366kB)

Abstract

We propose and test a simple hedging hypothesis for prediction interval formation in stock price forecasting. In the presence of uncertainty, forecasters hedge their forecasts by adjusting the bounds of the prediction interval in a way that reflects their forecast of the average forecast of others. This hypothesis suggests a positive relationship between the belief wedge, defined as the difference between the subject’s forecast of the average forecast of others and the subject’s own point forecast, and the asymmetry of the prediction interval. Empirical support for the hedging hypothesis is drawn from two in-class surveys, an experiment, and a large survey of professional analysts’ forecasts of future stock prices.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: John Wiley and Sons
ISSN: 0277-6693
Date of First Compliant Deposit: 1 October 2021
Date of Acceptance: 21 September 2021
Last Modified: 06 Nov 2023 18:57
URI: https://orca.cardiff.ac.uk/id/eprint/144542

Actions (repository staff only)

Edit Item Edit Item

Downloads

Downloads per month over past year

View more statistics