Forecaster diversity and the benefits of combining forecasts

Forecaster diversity and the benefits of combining forecasts

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Article ID: iaor199623
Country: United States
Volume: 41
Issue: 1
Start Page Number: 68
End Page Number: 75
Publication Date: Jan 1995
Journal: Management Science
Authors: ,
Keywords: time series & forecasting methods
Abstract:

The expected error variance of a combined forecast is necessarily lower than that of an individual forecast, but in practice there may be considerable variation around these expected values. This paper introduces a measure of the benefit from combining, the probability of a reduction in error variance, which recognizes this problem. The measure is applied to data on the forecasts and forecasting methods of a panel of U.S. economists to determine how the benefits of combining vary with the number of forecasts combined, and with the diversity in theories and techniques among the component forecasts.

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