Tuesday, May 29, 2012

Depression and Forecast Accuracy: Evidence from the 2010 FIFA World Cup
INSEAD Working Paper 2012/57/DS/OB revised version of 2011/19/DS/OB

Before and during the 2010 Soccer World Cup, participants made probabilistic forecasts for the outcomes of the tournament. We examine the relationship between their depression levels and their performance in this forecasting task. Across two different waves of predictions and with multiple measures and components of prediction accuracy, we find that depressed forecasters were less accurate. The poorer accuracy amongst the more depressed forecasters was primarily driven by neglect for base rate probabilities: The depressed participants assigned probabilities that departed more substantially from the base rates, particularly for low base rate events. Given the high incidence of depression in the workforce, the importance of judgmental probabilistic forecasting in many settings, and that we may be the first to look at depression- accuracy relationship using a real-world prediction task involving exogenous uncertainty, these findings may have important implications for both theory and practice.