An inappropriate prediction interval

An inappropriate prediction interval

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Article ID: iaor19922008
Country: Netherlands
Volume: 6
Start Page Number: 557
End Page Number: 558
Publication Date: May 1990
Journal: International Journal of Forecasting
Authors:
Abstract:

This paper discusses a point of confusion in the literature of applied forecasting. There is a misconception that multiplying s, the standard deviation of one-period-ahead forecast errors, by the square root of h gives a valid standard deviation for h-period-adhead forecast errors. This standard deviation and the interval forecasts produced with it are theoretically correct only for a random walk model.

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