To Aggregate, Pool, or Neither: Testing the Rational Expectations Hypothesis Using Survey Data

It is well known that even if all forecasters are rational, estimated coefficients in unbiasedness regressions using consensus forecasts are inconsistent because forecasters have private information. However, if all forecasters face a common realization, pooled estimators are also inconsistent. In contrast, we show that when predictions and realizations are integrated and cointegrated, micro-homogeneity ensures that consensus and pooled estimators are consistent. Therefore, contrary to claims in the literature, in the absence of micro-homogeneity, pooling is not a solution to the aggregation problem. We reject micro-homogeneity for a number of forecasts from the Survey of Professional Forecasters. Therefore, for these variables unbiasedness can only be tested at the individual level.