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Expert opinion versus expertise in forecasting
Author(s) -
Franses Philip Hans,
McAleer Michael,
Legerstee Rianne
Publication year - 2009
Publication title -
statistica neerlandica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.52
H-Index - 39
eISSN - 1467-9574
pISSN - 0039-0402
DOI - 10.1111/j.1467-9574.2009.00426.x
Subject(s) - autoregressive integrated moving average , expert opinion , econometric model , expert system , econometrics , relevance (law) , expert elicitation , computer science , subject matter expert , operations research , artificial intelligence , economics , machine learning , statistics , mathematics , time series , medicine , intensive care medicine , political science , law
Expert opinion is an opinion given by an expert, and it can have significant value in forecasting key policy variables in economics and finance. Expert forecasts can either be expert opinions, or forecasts based on an econometric model. An expert forecast that is based on an econometric model is replicable, and can be defined as a replicable expert forecast (REF), whereas an expert opinion that is not based on an econometric model can be defined as a non‐replicable expert forecast (Non‐REF). Both REF and Non‐REF may be made available by an expert regarding a policy variable of interest. In this paper, we develop a model to generate REF, and compare REF with Non‐REF. A method is presented to compare REF and Non‐REF using efficient estimation methods, and a direct test of expertise on expert opinion is given. The latter serves the purpose of investigating whether expert adjustment improves the model‐based forecasts. Illustrations for forecasting pharmaceutical stock keeping unit (SKUs), where the econometric model is of (variations of) the autoregressive integrated moving average model (ARIMA) type, show the relevance of the new methodology proposed in the paper. In particular, experts possess significant expertise, and expert forecasts are significant in explaining actual sales.