Statistical correction of judgmental point forecasts and decisions
AbstractIn many organizations point estimates labelled as 'forecasts' are produced by human judgment rather than statistical methods. However, when these estimates are subject to asymmetric loss they are, in fact, decisions because they involve the selection of a value with the objective of minimizing loss. While there are often considerable advantages in using judgment to arrive at these decisions the psychological demands of the task may mean that the resulting decisions are sub-optimal when compared with those resulting from a normative decision model. In these circumstances a combination of statistical methods and judgment may be superior. This paper suggests a procedure which involves the statistical correction of the original decision to obtain a forecast and the subsequent use of a mathematical model to identify the theoretically optimal decision in the light of this forecast. The application of the procedure to the monthly decisions of a manufacturing company suggests that it may offer the potential for achieving substantial improvements in many practical contexts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Omega.
Volume (Year): 24 (1996)
Issue (Month): 5 (October)
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert C. Blattberg & Stephen J. Hoch, 1990. "Database Models and Managerial Intuition: 50% Model + 50% Manager," Management Science, INFORMS, vol. 36(8), pages 887-899, August.
- M. J. Lawrence & R. H. Edmundson & M. J. O'Connor, 1986. "The Accuracy of Combining Judgemental and Statistical Forecasts," Management Science, INFORMS, vol. 32(12), pages 1521-1532, December.
- Dalrymple, Douglas J., 1987. "Sales forecasting practices: Results from a United States survey," International Journal of Forecasting, Elsevier, vol. 3(3-4), pages 379-391.
- Steven D. Wood & Bert M. Steece, 1978. "Forecasting the Product of Two Time Series with a Linear Asymmetric Error Cost Function," Management Science, INFORMS, vol. 24(6), pages 690-701, February.
- Goodwin, P & Wright, G, 1994. "Heuristics, biases and improvement strategies in judgmental time series forecasting," Omega, Elsevier, vol. 22(6), pages 553-568, November.
- Goodwin, Paul & Wright, George, 1993. "Improving judgmental time series forecasting: A review of the guidance provided by research," International Journal of Forecasting, Elsevier, vol. 9(2), pages 147-161, August.
- Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
- Goodwin, Paul, 2000. "Correct or combine? Mechanically integrating judgmental forecasts with statistical methods," International Journal of Forecasting, Elsevier, vol. 16(2), pages 261-275.
- Lee, Yun Shin, 2014. "A semi-parametric approach for estimating critical fractiles under autocorrelated demand," European Journal of Operational Research, Elsevier, vol. 234(1), pages 163-173.
- JS Armstrong & Fred Collopy, 2004. "Integration of Statistical Methods and Judgment for Time Series," General Economics and Teaching 0412024, EconWPA.
- Goodwin, Paul & Lawton, Richard, 1999. "On the asymmetry of the symmetric MAPE," International Journal of Forecasting, Elsevier, vol. 15(4), pages 405-408, October.
- Önkal, Dilek & Bolger, Fergus, 2004. "Provider-user differences in perceived usefulness of forecasting formats," Omega, Elsevier, vol. 32(1), pages 31-39, February.
- Goodwin, Paul, 2005. "Providing support for decisions based on time series information under conditions of asymmetric loss," European Journal of Operational Research, Elsevier, vol. 163(2), pages 388-402, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.