Forecast Pretesting and Correction
AbstractSometimes it is suggested that end users can improve forecasts by some kind of corrections. At least implicitly, the idea is to use such corrections if the forecasts appear too inaccurate by some criteria. Alternative forecasts can be defined based on whether a preliminary test of forecast usefulness and a subsequent correction has been made. The mean squared errors as some such forecasts are studied using some recent results on inequality pretesting. Uncorrected forecasts are shown to perform reasonably well. The optimal minimax regret critical values for the preliminary tests are fairly high, implying that the hypothesis of forecast usefulness mostly should be accepted and uncorrected forecasts used.
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Bibliographic InfoPaper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 324.
Length: 22 pages
Date of creation: 28 May 1990
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- Ilmakunnas, Pekka, 1996. "Use of macroeconomic forecasts in corporate forecasting: a note on aggregation problems," International Journal of Forecasting, Elsevier, vol. 12(3), pages 383-388, September.
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