Are Forecasts More Than Random Number Generators? Optimism Bias in Traffic and Revenue Forecasts
R Bain, Standard & Poor's, UK
Over the past two years the credit rating agency Standard & Poor?s has conducted research into the nature and extent of optimism bias in traffic and revenue forecasts. The analyst leading the research effort, Robert Bain, has concentrated on the international toll road sector and has published his findings in a series of S&P reports. However the initial research focus has expanded to explore other asset classes; mainly urban (light) and inter-urban (high speed) rail.
In this paper, the author provides an update of his research, results and conclusions. He looks across these different transport modes to explore what lessons can be learned from a cross-sectoral review of traffic and revenue forecast optimism bias. In conclusion, the author identifies the impact of optimism bias on the credit rating process and private investor appetite for transport-related debt.
Association for European Transport