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Significance tests harm progress in forecasting

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  • Armstrong, J. Scott

Abstract

Based on a summary of prior literature, I conclude that tests of statistical significance harm scientific progress. Efforts to find exceptions to this conclusion have, to date, turned up none. Even when done correctly, significance tests are dangerous. I show that summaries of scientific research do not require tests of statistical significance. I illustrate the dangers of significance tests by examining an application to the M3-Competition. Although the authors of that reanalysis conducted a proper series of statistical tests, they suggest that the original M3 was not justified in concluding that combined forecasts reduce errors and that the selection of the best method is dependent upon the selection of a proper error measure. I show that the original conclusions were justified and that they are correct. Authors should try to avoid tests of statistical significance, journals should discourage them, and readers should ignore them. Instead, to analyze and communicate findings from empirical studies, one should use effect sizes, confidence intervals, replications/extensions, and meta-analyses.
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Suggested Citation

  • Armstrong, J. Scott, 2007. "Significance tests harm progress in forecasting," International Journal of Forecasting, Elsevier, vol. 23(2), pages 321-327.
    • Handle: RePEc:eee:intfor:v:23:y:2007:i:2:p:321-327
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    1. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
    2. Makridakis, Spyros & Hibon, Michele, 2000. "The M3-Competition: results, conclusions and implications," International Journal of Forecasting, Elsevier, vol. 16(4), pages 451-476.
    3. Goodwin, Paul & Lawton, Richard, 2003. "Debiasing forecasts: how useful is the unbiasedness test?," International Journal of Forecasting, Elsevier, vol. 19(3), pages 467-475.
    4. Hubbard R. & Bayarri M.J., 2003. "Confusion Over Measures of Evidence (ps) Versus Errors (alphas) in Classical Statistical Testing," The American Statistician, American Statistical Association, vol. 57, pages 171-178, August.
    5. Armstrong, J. Scott & Collopy, Fred, 1992. "Error measures for generalizing about forecasting methods: Empirical comparisons," International Journal of Forecasting, Elsevier, vol. 8(1), pages 69-80, June.
    6. Koning, Alex J. & Franses, Philip Hans & Hibon, Michele & Stekler, H.O., 2005. "The M3 competition: Statistical tests of the results," International Journal of Forecasting, Elsevier, vol. 21(3), pages 397-409.
    7. Wright, Malcolm & Armstrong, J. Scott, 2007. "Verification of Citations: Fawlty Towers of Knowledge?," MPRA Paper 4149, University Library of Munich, Germany.
    8. Armstrong, J. Scott, 2006. "Findings from evidence-based forecasting: Methods for reducing forecast error," International Journal of Forecasting, Elsevier, vol. 22(3), pages 583-598.
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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General

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