Another look at forecast selection and combination:evidence from forecast pooling

Kourentzes, Nikolaos and Barrow, Devon Kennard and Petropoulos, Fotios (2019) Another look at forecast selection and combination:evidence from forecast pooling. International Journal of Production Economics, 209. pp. 226-235. ISSN 0925-5273

[img]
Preview
PDF (Kourentzes 2018 forecast-selection-combination)
Kourentzes_2018_forecast_selection_combination.pdf - Accepted Version
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (466kB)

Abstract

Forecast selection and combination are regarded as two competing alternatives. In the literature there is substantial evidence that forecast combination is beneficial, in terms of reducing the forecast errors, as well as mitigating modelling uncertainty as we are not forced to choose a single model. However, whether all forecasts to be combined are appropriate, or not, is typically overlooked and various weighting schemes have been proposed to lessen the impact of inappropriate forecasts. We argue that selecting a reasonable pool of forecasts is fundamental in the modelling process and in this context both forecast selection and combination can be seen as two extreme pools of forecasts. We evaluate forecast pooling approaches and find them beneficial in terms of forecast accuracy. We propose a heuristic to automatically identify forecast pools, irrespective of their source or the performance criteria, and demonstrate that in various conditions it performs at least as good as alternative pools that require additional modelling decisions and better than selection or combination.

Item Type:
Journal Article
Journal or Publication Title:
International Journal of Production Economics
Additional Information:
This is the author’s version of a work that was accepted for publication in International Journal of Production Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Production Economics,209, 2018 DOI: 10.1016/j.ijpe.2018.05.019
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2200/2209
Subjects:
ID Code:
125217
Deposited By:
Deposited On:
16 May 2018 09:24
Refereed?:
Yes
Published?:
Published
Last Modified:
24 Nov 2020 06:19