Peer influence in macroeconomic predictions

This paper examines whether economists are influenced by past predictions of other economists (the ‘peers’). Using data from the Bloomberg Economist Estimates survey, we find that macroeconomic predictions are negatively correlated with peers’ recent prediction errors of other variables in the economist's portfolio. In addition, survey participants simultaneously overreact to peers’ prediction errors and underreact to their own errors. Prediction errors of a certain variable are negatively correlated with peers’ prediction errors of the economist's portfolio variables. These results are consistent with behavioral models of limited attention and extrapolation. Finally, we find that low performers exhibit more overreaction than high performers, indicating that economists are heterogeneous in their ability to learn from the past.