Analysis of forecasters interest rate predictions over the period 1982 1990
Analysis of forecasters' interest rate predictions over the period 1982­1990 was intended to see whether the predictions corresponded to what actually happened. The 2 3 2 contingency table below shows the frequencies of actual and predicted interest rate movements.
(a) Calculate each probability (i­vi) and explain in words what it means.
(b) Do you think that the forecasters' predictions were accurate? Explain. (Data are from R. A. Kolb and H. O. Steckler, "How Well Do Analysts Forecast Interest Rates?" Journal of Forecasting 15, no. 15 [1996], pp. 385­394.)
i. P(F–)
ii. P(A+)
iii. P(A– | F–)
iv. P(A+ | F+)
v. P(A+ and F+)
vi. P(A– and F–)
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