A Test of Forecast Consistency Using USDA Livestock Price Forecasts

In traditional tests of forecast rationality, price forecasts are usually differenced to obtain stationarity. However, this data transformation may ignore important long-run information contained in forecasted price levels. Here, the concept of forecast consistency is paired with rationality concepts used in the market efficiency literature to develop a sequential testing procedure for forecast consistency and rationality. USDA quarterly livestock price forecasts do not demonstrate long-run consistency.