Financial forecasting — its inaccuracy can often be the punch line of a joke, but the business school will once again recognize an economist that may have silenced the laughter.
The W. P. Carey School of Business announced that Sherry Cooper, chief economist and executive vice president of BMO Financial Group will receive its Lawrence R. Klein award, which recognizes accuracy in financial forecasting throughout North America.
BMO Financial Group is a financial services organization headquartered in Toronto.
Cooper expressed deep gratitude in winning the award, saying it was difficult to predict economic trends in such a volatile market.
“We were in a period of unnerving collapse and unprecedented volatility for which there were no historical playbooks,” Cooper said.
Lee McPheters director of the school’s JPMorgan Chase Economic Outlook Center, explained that the award is decided by a formula that analyzes accuracy of predictions for gross domestic product (GDP), inflation, unemployment and the interest rates on treasury bills – a type of short-term loan issued by the government.
This was calculated and compared to 50 different economic forecasts, and the forecaster who had the least amount of error in their predictions for the last four years is declared the winner.
McPheters added that the award is respected because it’s different from any others. He said it values consistency over a period of time longer than just one year.
“Our award looks at forecasts from the last four years,” McPheters said. “You have to have the best forecast for four consecutive years.”
The award, which was first given in 1981, is named after a Nobel Prize winning economist, recognized for his work in using computer models to increase accuracy in financial forecasts. Past winners include Mickey Levy, chief economist for Bank of America, and Joel Naroff, a noted economic advisor in Pennsylvania.
Naroff said he felt the award is the highest recognition members of the field can receive.
“As far as I am concerned, the Klein award is the greatest award for an economic forecaster,” Naroff said.
Naroff added that being able to understand trends in the economy and use them to predict future outcomes is an important aspect of a business, saying that though businesses cannot rely on predictions alone, they must take them into account when strategizing.
“You don’t want to bet the bank without an economic forecast,” Naroff said.
Naroff agreed with McPheters about the award being respected for encouraging long-term predictions, saying he was proud to win an award that put a high value on consistency.
“You can’t just throw a dart one year and win the award.” Naroff said. “It takes luck out of the equation.”
The award ceremony will be held Oct. 21 at the University Club, a historic private social club located in Manhattan, New York.
Cooper will present her 2011 forecast at the event, which suggests improvement in the housing markets and a drop in the unemployment rate.
Reach the reporter at Michael.reppenhagen@asu.edu
