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ECON 332Business Forecasting MethodsChapter 8Combining Forecast ResultsProf. Kirti K. Katkar 
 
8-2
Combining Forecast Results
Why combine forecast results rather than using a singlemethod?
•83% of expert forecasters believe that combining forecastresults from different modelsimproves forecast accuracy•Optimal individual forecasting model offers lowest RMSE andstatistically “best” forecasts; combing forecasts offers theforecast improvementover the individual methods•Combining forecast results tend to be inclusionary
 – They include all thevariablesfrom models that would be discardedotherwise to choose statistically best forecast – They include all therelationshipsfrom models that would be discardedotherwise to choose statistically best forecast
•Major requirement for combining forecast results is thatforecasts to be combined need to beunbiased
 – They cannot allconsistently overestimate or underestimatethe truevalue
 
8-3
Combined Forecast
To ensure unbiased individual forecasts•Choose models based on different methods•Have different forecasters develop different models / forecasts
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