What is the proper role of professional economic forecasts in financial decisions? The case shows excerpts from three leading economic forecaster the night before, and just after the stock market crash in October 1929. The first set of excerpts is from Roger Babson, an entrepreneur from Wellesley, Massachusetts, the considerable fame for correctly predicting the downturn on the basis of its own forecast device that won “Babsonchart.” The second set is from the staff of the Har … Read more »

What is the proper role of professional economic forecasts in financial decisions? The case shows excerpts from three leading economic forecaster the night before, and just after the stock market crash in October 1929. The first set of excerpts is from Roger Babson, an entrepreneur from Wellesley, Massachusetts, the considerable fame for correctly predicting the downturn on the basis of its own forecast device that won “Babsonchart.” The second set is from the staff of the Harvard Economic Society, an international group of renowned economists and statisticians. To create their forecasts, the Harvard Economic Society developed a model that attributed the economic activity in three areas: speculation, economic and money. The Harvard group had great success when they introduced their model in the early 1920s, but failed because of the stock market crash in 1929 to predict. The third set of excerpts is from Irving Fisher, leading monetary economist of his time and one of the most respected American economists of all time. Although the crash involved Fisher by surprise, he remained an important figure in the forecast area in the 1930s. The case also passages from the University of Chicago Professor Garfield Cox efforts in 1930 to assess the accuracy of the predictions in the 1920s.
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from
Walter A. Friedman
Source: Harvard Business School
21 pages.
Release Date: 29 January 2008. Prod #: 708046-PDF-ENG
Forecast of world economic crisis HBR case solution

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