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Minimum variance pooling of forecasts at different levels of aggregation
Author(s) -
Fuhrer Jeff,
Haltmaier Jane
Publication year - 1988
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/for.3980070106
Subject(s) - pooling , aggregate (composite) , econometrics , consensus forecast , variance (accounting) , forecast error , statistics , economics , computer science , mathematics , materials science , accounting , artificial intelligence , composite material
Abstract The most common approach to combining forecasts at different levels of aggregation has been to sum (or average) the more disaggregated forecast, and take a weighted average of the aggregate forecasts. This paper develops a simple method for obtaining minimum variance pooled forecasts at the disaggregated level. The major advantage that this method has over the common approach is that it provides pooled forecasts at both the aggregated and disaggregated level. As will be shown, the resulting aggregate pooled forecast is identical to the forecast which would be obtained by simply pooling two forecasts at the aggregate level, while the disaggregated forecast maintains the aggregation identity required by the problem.