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Working Paper
On the Wisdom of Crowds (of Economists)
We study the properties of macroeconomic survey forecast response averages as the number of survey respondents grows. Such averages are “portfolios” of forecasts. We characterize the speed and pattern of the gains from diversification as a function of portfolio size (the number of survey respondents) in both (1) the key real-world data-based environment of the U.S. Survey of Professional Forecasters, and (2) the theoretical model-based environment of equicorrelated forecast errors. We proceed by proposing and comparing various direct and model-based “crowd size signature plots,” which ...