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Combination of biased forecasts: Bias correction or bias based weights?

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  • Wenzel, Thomas

Abstract

Most of the literature on combination of forecasts deals with the assumption of unbiased individual forecasts. Here, we consider the case of biased forecasts and discuss two different combination techniques resulting in an unbiased forecast. On the one hand we correct the individual forecasts, and on the other we calculate bias based weights. A simulation study gives some insight in the situations where we should use the different methods.

Suggested Citation

  • Wenzel, Thomas, 1999. "Combination of biased forecasts: Bias correction or bias based weights?," Technical Reports 1999,50, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    • Handle: RePEc:zbw:sfb475:199950
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    1. Klapper, Matthias, 1998. "Combining German macro economic forecasts using rank-based techniques," Technical Reports 1998,19, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    2. Wenzel, Thomas, 1998. "Pitman-closeness and the linear combination of multivariate forecasts," Technical Reports 1998,34, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    3. Deutsch, Melinda & Granger, Clive W. J. & Terasvirta, Timo, 1994. "The combination of forecasts using changing weights," International Journal of Forecasting, Elsevier, vol. 10(1), pages 47-57, June.
    4. Tilman Ehrbeck & Robert Waldmann, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 21-40.
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    1. Thomas Wenzel, 2001. "Hits-and-misses for the evaluation and combination of forecasts," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(6), pages 759-773.
    2. Wenzel, Thomas, 2000. "Hits-and-misses for the evaluation and combination of forecasts," Technical Reports 2000,26, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.

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