Professional vs. amateur judgment accuracy: the case of foreign exchange rates

Date

2003

Authors

Önkal D.
Yates, J. F.
Simga‐Mugan, C.
Öztin, Ş.

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Abstract

Highly knowledgeable people often fail to achieve highly accurate judgments, a phenomenon sometimes called the "process-performance paradox." The present research tested for this paradox in foreign exchange (FX) rate forecasting. Forty professional and 57 sophisticated amateur forecasters made one-day and one-week-ahead FX predictions in deterministic and probabilistic formats. Among the conclusions indicated by the results are: (a) professional accuracy usually surpasses amateur accuracy, although many amateurs outperform many professionals; (b) professionals appear to achieve high proficiency via heavy reliance on predictive information (unlike what has been observed before, e.g., for stock prices); (c) forecast format strongly affects judgment accuracy and processes; and (d) apparent overconfidence can transform itself into underconfidence depending on when and how forecasters must articulate their confidence.

Source Title

Organizational Behavior and Human Decision Processes

Publisher

Academic Press

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Published Version (Please cite this version)

Language

English