On the Need for Cognitive Closure and Judgmental Trend Forecasting
DOI:
https://doi.org/10.15678/AOC.2017.1702Keywords:
judgmental forecast, need for cognitive closure, time series analysis, trend identificationAbstract
The paper considers the following hypothesis: humans’ need for cognitive closure reduces the usage of historical observations in judgmental forecasts only in horizontal trends. To test this hypothesis, three studies were conducted. In each, participants forecasted the next, unknown observation using the previous time series. The analysis concentrated on trend analysis and how the trends in historical data are used as the basis for forecasting depending on psychological traits, in particular cognitive closure.
References
Goodwin, P. (2005) “Providing Support for Decisions Based on Time Series Information under Conditions of Asymmetric Loss”. European Journal of Operational Research 163 (2): 388–402, https://doi.org/10.1016/j.ejor.2003.10.039.
Kruglanski, A. W. (1989) Lay Epistemics and Human Knowledge: Cognitive and Motivational Bases. New York: Springer.
Lawrence, M., Goodwin, P., O’Connor, M. and Önkal, D. (2006) “Judgmental Forecasting: A Review of Progress over the Last 25 Years”. International Journal of Forecasting 22 (3): 493–518, https://doi.org/10.1016/j.ijforecast.2006.03.007.
R: A Language and Environment for Statistical Computing (2016). Vienna: R Foundation for Statistical Computing.
Roets, A. and Van Hiel, A. (2011) “Item Selection and Validation of a Brief, 15-item Version of the Need for Closure Scale”. Personality and Individual Differences 50 (1): 90–94, https://doi.org/10.1016/j.paid.2010.09.004.
Tyszka, T., Markiewicz, Ł., Kubińska, E., Gawryluk, K. and Zielonka, P. (2017) “A Belief in Trend Reversal Requires Access to Cognitive Resources”. Journal of Cognitive Psychology 29 (2): 202–16, https://doi.org/10.1080/20445911.2016.1245195.
Weber, E. U., Siebenmorgen, N. and Weber, M. (2005) “Communicating Asset Risk: How Name Recognition and the Format of Historic Volatility Information Affect Risk Perception and Investment Decisions”. Risk Analysis 25 (3): 597–609, https://doi.org/10.1111/j.1539-6924.2005.00627.x.
Webster, D. M. and Kruglanski, A. W. (1994) “Individual Differences in Need for Cognitive Closure”. Journal of Personality and Social Psychology 67 (6): 1049–62, https://doi.org/10.1037/0022-3514.67.6.1049.
Yates, J. F., McDaniel, L. S. and Brown, E. S. (1991) “Probabilistic Forecasts of Stock Prices and Earnings: The Hazards of Nascent Expertise”. Organizational Behavior and Human Decision Processes 49 (1): 60–79, https://doi.org/10.1016/0749-5978(91)90042-r.
