City Research Online

Abstract

People’s forecasts from time series underestimate future values for upward trends and overestimate them for downward ones. This trend damping may occur because 1) people anchor on the last data point and make insufficient adjustment to take the trend into account, 2) they adjust towards the average of the trends they have encountered within the experiment, or 3) they are adapted to an environment in which natural trends tend to be damped. Two experiments eliminated the first account: for series that are negatively accelerated or have shallow slopes, people showed anti-damping (the opposite of damping), a phenomenon that cannot be interpreted in terms of under-adjustment. These experiments also produced results consistent with the second account: forecasts for a given function clearly depended on the other functions that were forecast within the same experiment. However, this second account was itself eliminated by a third experiment demonstrating both damping and, to a lesser degree, anti-damping when people forecast from a single series. We conclude that people have adapted to degrees of growth and decay that are representative of their environment: damping occurs when trends in presented series are steeper than this and anti-damping occurs when they are shallower.

Publication Type:	Article
Additional Information:	Copyright APA 2013. This article may not exactly replicate the final version published in the APA journal. It is not the copy of record.
Publisher Keywords:	adaptation, under-adjustment, forecasting, trend damping, context effects
Subjects:	B Philosophy. Psychology. Religion > BF Psychology
Departments:	School of Health & Psychological Sciences > Psychology
SWORD Depositor:	Symplectic Administrator

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