The Status Quo Bias of Bond Market Analysts

Status quo bias is a systematic cognitive error which makes it difficult forindividuals to make decisions independently of the currently dominant situation.This study pursues the question of whether bond market analysts are affected bystatus quo bias. We evaluated interest rate forecast series from twelve industrialnations. This revealed that, on average, forecasts were much too close to the statusquo – the current interest rate at the time when the forecast was made. With theaid of various analytical procedures it can be shown that the actual extent ofinterest rate changes is systematically and significantly underestimated.