Subjective versus objective combining of forecasts: An experiment

✍ Scribed by Benito E. Flores; Dr Edna M. White

• Publisher: John Wiley and Sons
• Year: 1989
• Tongue: English
• Weight: 593 KB
• Volume: 8
• Category: Article
• ISSN: 0277-6693
• DOI: 10.1002/for.3980080314

✦ Synopsis

The paper reports results of an experiment conducted to evaluate subjective versus objective combination of forecasts. The subjects were undergraduate students at Texas A&M. The students forecasted two different types of time series. The results found show that the subjective combination of forecasts improves their accuracy as compared with individual efforts. Four ex-anfe weighting methods were also used to combine the forecasts. They all improve the accuracy of the forecasts. The best results, though, were from the subjective combination of forecasts.

KEY WORDS Combining forecasts Application Judgemental

Past research has suggested that forecast accuracy can be improved by combining forecasts from different sources. Although there is currently general agreement that such combinations can increase accuracy, there is still concern as to the preferred method of combination. Such research is often concerned with comparing various sophisticated weighting methods, using either ex-ante or ex-post weights, to a simple average of forecasts. Additionally, research has been directed towards determining how to select the base forecasts for inclusion in the combining process. This work has compared the value of subjective and objective base forecasts.

These different research streams can be categorized using the framework shown in Figure 1. Most previous effort has been in cell A: the objective combination of objective base forecasts. (for instance, Makridakis et al.