This study reports the results of an experiment that examines (i) the
effects of forecast horizon on the performance of probability forecasters, and
(ii) the alleged existence of an inverse expertise effect, i.e., an inverse
relationship between expertise and probabilistic forecasting performance.
Portfolio managers are used as forecasters with substantive expertise.
Performance of this 'expert' group is compared to the performance of a
'semi-expert' group composed of other banking professionals trained in
portfolio management. It is found that while both groups attain their best
discrimination performances in the four-week forecast horizon, they show their
worst calibration and skill performances in the 12-week forecast horizon. Also,
while experts perform better in all performance measures for the one-week
horizon, semi-experts achieve better calibration for the four-week horizon. It
is concluded that these results may signal the existence of an inverse
expertise effect that is contingent on the selected forecast horizon.
November 23, 2008