Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity

Kajal Lahiri, Huaming Peng and Xuguang Simon Sheng

No 8810, CESifo Working Paper Series from CESifo

Abstract: We have argued that from the standpoint of a policy maker who has access to a number of expert forecasts, the uncertainty of a combined forecast should be interpreted as that of a typical forecaster randomly drawn from the pool. With a standard factor decomposition of a panel of forecasts, we show that the uncertainty of a typical forecaster can be expressed as the disagreement among the forecasters plus the volatility of the common shock. Using new statistics to test for the homogeneity of idiosyncratic errors under the joint limits with both T and n approaching infinity simultaneously, we find that some previously used measures significantly underestimate the conceptually correct benchmark forecast uncertainty.

Keywords: disagreement; forecast combination; panel data; uncertainty (search for similar items in EconPapers)
JEL-codes: C12 C33 E37 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Chapter: Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity* (2022)
Working Paper: Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity (2021)
Working Paper: Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity (2015)
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