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Combining ordinal forecasts with an application in a financial market
Author(s) -
Fan Dennis K.,
Lau KinNam,
Leung PuiLam
Publication year - 1996
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/(sici)1099-131x(199601)15:1<37::aid-for603>3.0.co;2-c
Subject(s) - consensus forecast , econometrics , stock market , computer science , financial market , stock (firearms) , point (geometry) , economics , finance , mathematics , geography , context (archaeology) , geometry , archaeology
The literature on combining forecasts has almost exclusively focused on combining point forecasts. The issues and methods of combining ordinal forecasts have not yet been fully explored, even though ordinal forecasting has many practical applications in business and social research. In this paper, we consider the case of forecasting the movement of the stock market which has three possible states (bullish, bearish and sluggish). Given the sample of states predicted by different forecasters, several statistical and operation research methods can be applied to determine the optimal weight assigned to each forecaster in combining the ordinal forecasts. The performance of these methods is examined using Hong Kong stock market forecasting data, and their accuracies are found to be better than the consensus method and individual forecasts.