A FINAL COMMENT ON COMBINING FORECASTS

There is one other general forecasting method that is worth mentioning. In fact, it has attracted a lot of attention in recent years , and many researchers believe that it has great potential for increasing forecast accuracy. The method is simple ” combine two or more forecasts to obtain the final forecast. The reasoning behind this method is also simple ” the forecast errors from different forecasting methods may cancel one another. The forecasts that are combined can be of the same general type ” extrapolation forecasts, for example ” or they can be of different types, such as judgmental and extrapolation. The number of forecasts to combine and the weights to use in combining them have been the subjects of several research studies.

Although the findings are not entirely consistent, it appears that the marginal benefit from each individual forecast after the first two or three is minor. Also, there is not much evidence to suggest that the simplest weighting scheme ” weight each forecast equally, that is, average them ” is any less accurate than more complex weighting schemes.