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Beyond Error Measures to the Utility and Cost of the Forecasts

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  • Elizabeth Yardley
  • Fotios Petropoulos

Abstract

The authors criticize the exclusive use of forecast-error metrics to evaluate forecast methods, arguing for evaluations of forecast value, a construct that also incorporates considerations of the utility to the forecast user (influence on decision making), the cost of computation, and opportunity cost of understandability. They highlight evidence on forecast utility and cost from recent studies and explore the implications for forecast-method selection. Copyright International Institute of Forecasters, 2021

Suggested Citation

  • Elizabeth Yardley & Fotios Petropoulos, 2021. "Beyond Error Measures to the Utility and Cost of the Forecasts," Foresight: The International Journal of Applied Forecasting, International Institute of Forecasters, issue 63, pages 36-45, Q4.
    • Handle: RePEc:for:ijafaa:y:2021:i:63:p:36-45
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    Cited by:

    1. Weronika Nitka & Rafał Weron, 2023. "Combining predictive distributions of electricity prices. Does minimizing the CRPS lead to optimal decisions in day-ahead bidding?," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 33(3), pages 105-118.
    2. Katarzyna Maciejowska & Bartosz Uniejewski & Rafa{l} Weron, 2022. "Forecasting Electricity Prices," Papers 2204.11735, arXiv.org.

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