EURO2013

Defective Probabilistic Forecasts: Comforting the perplexed

Invited abstract in session WD-53: Probabilistic Approach to Modeling Macroeconomic Uncertainties, stream Forecasting & Time Series Prediction II.

Area: Data Science, Business Analytics, Data Mining

Wednesday, 14:30-16:00
Room: B13-2

Authors (first author is the speaker)

1. Reason L. Machete
Department of Mathematics, University of Botswana

Abstract

In operational forecasting, the goal of probabilistic forecasting may be unattainable due to model imperfection. Consequently, the resulting probabilistic forecasts will be defective. Considering macroeconomic forecasts for both the UK and the US, the types of defects that one can have are discussed. Both theoretical and empirical results are presented, which include ways to remedy these defects. One can have either pessimism or over-confidence in some way. Is it high time we realised that calibration is a mirage and should use alternative approaches to assess probabilistic forecasts?

Keywords

Status: accepted


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