Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2023:2: Market Participants or the Random Walk – Who Forecasts Better? Evidence from Micro Level Survey Data

Tamás Kiss (), Kamil Kladivko (), Oliwer Silfverberg () and Pär Österholm ()
Additional contact information
Tamás Kiss: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Kamil Kladivko: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Oliwer Silfverberg: 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: We analyse micro-level data concerning four financial variables in Sveriges Riksbank’s Prospera Survey to evaluate the accuracy of forecasts provided by professionals active in the Swedish fixed-income market. Our results indicate that for the SEK/EUR and SEK/USD exchange rates, and the five-year government bond yield, none of the market participants that frequently participate in the survey manage to significantly outperform the random-walk forecast. For the central bank’s policy rate, the market participants typically have a statistically significant higher forecast accuracy than the random-walk forecast at the three-month horizon; however, at the two- and five-year horizons, the random-walk forecast typically outperform the market participants.

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

JEL-codes: E47; G17

Language: English

14 pages, January 18, 2023

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