Models vs. Experts #3: Advertising Sales Predictions

Models vs. Experts #3: Advertising Sales Predictions

May 6, 2013 Behavioral Finance
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(Last Updated On: January 18, 2017)

A Field Test of Implications of Laboratory Studies of Decision Making

  • Ashton, A. H.
  • The Accounting Review, 59, 361-375
  • A version of the paper can be found here.
  • Want a summary of academic papers with alpha? Check out our free Academic Alpha Database!


This study provides real-world evidence about the validity of the results of an experimental lens model study evaluating the prediction accuracy of corporate executives versus that of regression models. The decision task involves predictions of annual advertising page sales used in current operating budgets at Time magazine. Actual quarterly predictions by Time executives for the years 1977-1981 are compared with predictions made by regression models that were based on data available to the executives when they made their predictions. Comparisons of executives and models are based on an accuracy criterion of actual absolute error. The present results agree with prior experimental results, which show that models predict more accurately than people. Therefore, one of the principal conclusions from lens model research-that simple models might successfully replace people in certain time-consuming, repetitive decision tasks-is supported. However, consistent underprediction by executives is observed. A crude correction for mean error is applied to predictions made by executives and by regression models, with the result that the executives’ corrected predictions are more accurate than the models’ corrected predictions.


Can a simple regression model outperform predictions of corporate executives when confronted with the task of estimating annual advertising page sales?

The author feeds the regression model the following variables:

  1. The quarter to which the data apply (first, second or third);
  2. Total advertising pages actually published in the magazine during the quarter
  3. Total advertising pages for the quarter in the alcoholic beverages
  4. Total advertising pages for the quarter in the automotive
  5. Total advertising pages for the quarter in the smoking materials categories
  6.  Bookings-to-date
  7. New (i.e., incremental) bookings for the quarter
  8. Cumulative actual advertising pages for the year-to-date.

Alpha Highlight:

Table 1 highlights executives vs model results. * represent observations where the executives beat models. As you can see, there aren’t many “stars.” In general, executives underpredict (conservative bias?). In no cases are the prediction results by the executives better than the results from the models. Models win this round.

2013-05-06 15_40_59-Ashton_1984
Click to enlarge

Thoughts on the paper?

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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.