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Evaluating Individual and Mean Non-Replicable Forecasts

Chang, Chia-Lin and Franses, Philip Hans and McAleer, Michael (2011) Evaluating Individual and Mean Non-Replicable Forecasts. [Working Paper or Technical Report] (Unpublished)

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Abstract

Macroeconomic forecasts are often based on the interaction between econometric models and experts. A forecast that is based only on an econometric model is replicable and may be unbiased, whereas a forecast that is not based only on an econometric model, but also incorporates expert intuition, is non-replicable and is typically biased. In this paper we propose a methodology to analyze the qualities of individual and means of non-replicable forecasts. One part of the methodology seeks to retrieve a replicable component from the non-replicable forecasts, and compares this component against the actual data. A second part modifies the estimation routine due to the assumption that the difference between a replicable and a non-replicable forecast involves measurement error. An empirical example to forecast economic fundamentals for Taiwan shows the relevance of the methodological approach using both individuals and mean forecasts.

Item Type:Working Paper or Technical Report
Additional Information:JEL Classifications: C53, C22, E27, E37.
Uncontrolled Keywords:Individual forecasts, Mean forecasts, Efficient estimation, Generated regressors, Replicable forecasts, Non-replicable forecasts, Expert intuition.
Subjects:Social sciences > Economics > Econometrics
Social sciences > Economics > Macroeconomics
Series Name:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2011
Number:15
ID Code:12746
References:

Chang, C.-L., P.H. Franses and M. McAleer (2009), How Accurate are Government Forecasts of Economic Fundamentals? The Case of Taiwan, International Journal of Forecasting, to appear. Available at SSRN: http://ssrn.com/abstract=1431007.

Eroglu, C. and K.L. Croxton (2010), Biases in Judgmental Adjustments of Statistical Forecasts: The Role of Individual Differences, International Journal of Forecasting, 26, 116-133.

Fildes, R, P. Goodwin, M. Lawrence, and K. Nikolopoulos (2009), Effective Forecasting and Judgemental Adjustments: An Empirical Evaluation and Strategies for Improvement in Supply-Chain Planning, International Journal of Forecasting, 25, 3-23.

Franses, P.H., H. Kranendonk, and D. Lanser (2011), One Model and Various Experts: Evaluating Dutch Macroeconomic Forecasts, International Journal of Forecasting, 27, 482-495.

Franses, P.H. and R. Legerstee (2010), Do Experts’ Adjustments on Model-based SKU-level Forecasts Improve Forecast Quality?, Journal of Forecasting, 29, 331-340.

Franses, P.H., M. McAleer and R. Legerstee (2009), Expert Opinion Versus Expertise in Forecasting, Statistica Neerlandica, 63, 334-346.

Smith, J. and M. McAleer (1994), Newey-West Covariance Matrix Estimates for Models with Generated Regressors, Applied Economics, 26, 635-640.

Deposited On:19 May 2011 08:45
Last Modified:14 Mar 2014 08:40

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