A note on the forecast performance of temporal aggregation

A note on the forecast performance of temporal aggregation

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Article ID: iaor201524042
Volume: 61
Issue: 7
Start Page Number: 489
End Page Number: 500
Publication Date: Oct 2014
Journal: Naval Research Logistics (NRL)
Authors: , , ,
Keywords: demand, decision
Abstract:

Earlier research on the effects of nonoverlapping temporal aggregation on demand forecasting showed the benefits associated with such an approach under a stationary AR(1) or MA(1) processes for decision making conducted at the disaggregate level. The first objective of this note is to extend those important results by considering a more general underlying demand process. The second objective is to assess the conditions under which aggregation may be a preferable approach for improving decision making at the aggregate level as well. We confirm the validity of previous results under more general conditions, and we show the increased benefit resulting from forecasting by temporal aggregation at lower frequency time units.

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