Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2022:14: Analysts versus the Random Walk in Financial Forecasting: Evidence from the Czech National Bank’s Financial Market Inflation Expectations Survey

Kamil Kladívko () and Pär Österholm ()
Additional contact information
Kamil Kladívko: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Pär Österholm: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden

Abstract: In this paper, we analyse how financial market analysts’ expectations in the Czech National Bank’s Financial Market Inflation Expectations survey perform relative to the random-walk forecast when it comes to predicting five financial variables. Using data from 2001 to 2022, our results indicate that the analysts are able to signifi-cantly outperform the random-walk forecast for the repo rate and Prague Interbank Offered Rate at the one-month forecasting horizon. For the five-year and ten-year interest rate swap rate, the random walk significantly outperforms the analysts at both the one-month and one-year forecasting horizons. For the CZE/EUR ex-change rate, no statistically significant differences in forecast precision were found.

Keywords: Survey data; Out-of-sample forecasts; Exchange rates; Interest rates

JEL-codes: E47; G17

Language: English

14 pages, November 25, 2022

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