Financial Forecasting and the Wisdom of Select Crowds
Title: Financial Forecasts and the Wisdom of Select Crowds
Authors: Christoph Merkle (University of Mannheim) and Jack Soll (Duke University)
Abstract: Forecasts of financial markets are notoriously difficult. But unless markets are strong form efficient, expert opinion might contain valuable information. Several surveys of financial professionals gather forecasts for stock market return and volatility and typically publish a consensus estimates. We examine whether small crowd strategies selecting forecasters based on past performance can improve this (large crowd) consensus. We use the ZEW financial market survey and the Duke CFO US Business Outlook to test these strategies. Both, for return and volatility estimates, select crowds outperform the average judge and the large crowd.