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A Manager's Perspective on Combining Expert and Model-based Forecasts

Philip Hans Franses and Rianne Legerstee

No ERS-2007-083-MKT, ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: We study the performance of sales forecasts which linearly combine model-based forecasts and expert forecasts. Using a unique and very large database containing monthly model-based forecasts for many pharmaceutical products and forecasts given by thirty-seven different experts, we document that a combination almost always is most accurate. When correlating the specific weights in these "best" linear combinations with experts' experience and behaviour, we find that more experience is beneficial for forecasts for nearby horizons. And, when the rate of bracketing increases the relative weights converge to a 50%-50% distribution, when there is some slight variation across forecasts horizons.

Keywords: combining forecasts; experts forecast; model-based forecasts (search for similar items in EconPapers)
JEL-codes: C44 C53 L81 M M31 (search for similar items in EconPapers)
Date: 2007-12-06
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