Masahiro Ashiya

Herd behavior of Japanese economists

Suppose competent economists obtain common information on business forecasts, and incompetent economists obtain independent information. If no one knows who is able, young economists mimic others because a forecast different from others indicated inability when it proves wrong. An older economist, however, can infer his ability from past information. Those who got useful information stop herding to signal their ability when economists are heterogeneous. All economists herd together when economists are homogenous and the merit from signaling is small. The empirical results suggests that Japanese economists are more homogenous than American.

Testing the rationality of Japanese GDP forecasts: the sign of forecast revision matters

Abstract This paper analyzes the rationality of Japanese GDP forecasts of individual economists. It finds that Japanese forecasters are pessimistic (optimistic) when their forecast revisions (FRs) are positive (negative), and that they always over-react to new information. Across forecasters, the magnitude of average FR is not correlated with the magnitude of average forecast errors (FE). These results together are consistent with neither the rational expectations hypothesis nor reputation models with rational and strategic forecasters.

Weak entrants are welcome

This paper investigates the decision problem of an incumbent firm confronted by both a weak and a strong entrant in a differentiated market. Suppose that the incumbent can deter entry of the weak firm, but cannot deter entry of the strong firm by itself. Then the incumbent may allow entry of the weak firm and use it to alter the strong firms entry decision. The present paper formalizes this idea, and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade loberalization. The idea also expalins why a dominant firm lets fringe firms be in the market.

The directional accuracy of 15-months-ahead forecasts made by the IMF

A considerable number of studies have investigated the directional accuracy of macroeconomic forecasts, and have obtained mixed results for long-term forecasts. This paper re-examines this issue using the IMF forecasts for the G7 countries, and find that combining the long-term and the short-term forecasts significantly improves the directional accuracy.

Twenty-two years of Japanese institutional forecasts

This paper evaluates accuracy and rationality of real GDP forecasts made by 38 Japanese private institutions over the past 22 years. It finds that about 80% of current-year forecasts and year-ahead forecasts made by them pass various tests for rationality. Moreover, the encompassing test reveals the following results: (a) All of these forecasts outperform the naïve forecasts; (b) About half of their current-year forecasts are inferior to the corresponding forecast of VAR, VECM, or the Japanese government; (c) Almost all of their year-ahead forecasts are significantly superior to the corresponding forecast of VAR or the Japanese government, but one-third of them are significantly inferior to VECM forecast; (d) The consensus forecast outperforms typical institutions forecast.

Accuracy and rationality of Japanese institutional forecasters

Abstract This paper uses the GDP forecast data of Japanese institutional forecasters, and examines the relation between their accuracy and rationality. It finds that they as a whole are pessimistic (optimistic) when their forecast revisions are positive (negative), and that they always over-react to new information. Moreover, these biases are stronger for those who release less accurate forecasts on average. Neither the rational expectations hypothesis nor reputation models with rational and strategic forecasters can explain these results consistently.

Consensus and accuracy of Japanese GDP forecasts

This article investigates the real gross domestic product forecasts of Japanese institutional forecasters for 25 years. It finds that a consensus forecast does not exist in 9/8 years for the current-year/year-ahead forecasts. The variance of the forecast distribution is positively correlated with the absolute forecast error of its mean forecast, but the correlation is significant for the current-year forecasts only. The economy tends to hit the peak or the bottom when forecast dispersion is large, but nonparametric analysis shows that the correlation is statistically insignificant.

Sequential Entry in a Vertically Differentiated Market

This paper considers a sequential entry game of homogeneous firms in a vertically differentiated market. A firm can choose any variety of products, with a fixed cost per product. Each product can be withdrawn afterwards without exit costs. Then each firm chooses one product at most in equilibrium because of a commitment problem. The first firm chooses the highest quality if the fixed cost is so large that subsequent entry is blockaded. It chooses middle quality to deter entry of a low?quality firm if the fixed cost decreases. Hence everyone becomes worse off as the entrant becomes more dangerous.

Lock! Risk-Free Arbitrage in the Japanese Racetrack Betting Market

This article finds that arbitrage was possible in 2 of the 175 Japanese thoroughbred races even after taking account of (a) the size of the minimum betting unit and (b) the negative effect of arbitrage on the odds. The guaranteed profits in these two races were 5,120 yen (about US

Strategic bias and professional affiliations of macroeconomic forecasters

64) and 340 yen.