Overreaction in Macroeconomic Expectations. Andrei Shleifer, December 2017, Paper, “We examine the rationality of individual and consensus professional forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), which focuses on the predictability of forecast errors from earlier forecast revisions. We document two principal findings: at the individual level, forecasters typically over-react to information, while consensus forecasts exhibit under-reaction. To reconcile these findings, we combine the diagnostic expectations model of belief formation from Bordalo, Gennaioli, and Shleifer (2018) with Woodford’s (2003) noisy information model of belief aggregation.Link