How Views of Professional Forecasters Affect Individual Expectations : Evidence from a Nationally Representative Survey-Based Experiment

I conduct a randomized information experiment to study the response of individual expectations to the views of professional forecasters. In the experiment, respondents are randomly divided into two groups to receive truthful but different professional forecasts of nationwide house prices. I find that respondents adjust their nationwide house price expectations in the direction of the views of professional forecasters. On average, respondents assign a weight of roughly 69 percent on the information provided in the experiment. Professional forecasts of nationwide house prices also affect respondents’ expected local house price growth. I show that homeowners increase their intended and actual household spending in response to the revised outlook on the local housing market. The results have implications for the formation of individual expectations, and they suggest that news reports about the views of professional forecasters can have immediate effect on individuals’ expectations and their consumption behavior