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Combining Combined Forecasts: a Network Approach

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  • Marcos Ross Fernandes

Abstract

This paper studies how communication across experts prior to aggregation by a decision-maker affects the efficiency of forecast combination. When experts exchange information before reporting their forecasts, their signals become correlated through the communication network, altering aggregation efficiency even when forecasts are unbiased. The analysis introduces a statistic that characterizes how network structure shapes aggregation efficiency and shows that degree heterogeneity plays a central role. Among connected networks, regular networks attain the minimal level of aggregation distortion, while star networks generate the largest distortions within sparse connected structures. Random network benchmarks show that aggregation efficiency approaches the regular-network benchmark when expected degree either vanishes or becomes large as network size increases, whereas networks with constant expected degree generate intermediate distortions. These results provide a theoretical foundation for understanding how communication across experts affects forecast combination and establish a connection between the forecast combination literature and models of social learning in networks.

Suggested Citation

  • Marcos Ross Fernandes, 2026. "Combining Combined Forecasts: a Network Approach," Working Papers, Department of Economics 2026_23, University of São Paulo (FEA-USP).
  • Handle: RePEc:spa:wpaper:2026wpecon23
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    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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