The Art and Science of Making and Using Forecasts

• Published in: Inside the Crystal Ball pp. 27 - 50
• Main Author: Harris, Maury
• Format: Book Chapter
• Language: English
• Published: United States John Wiley & Sons, Incorporated 2014; Wiley; John Wiley & Sons, Inc
• Subjects: economic forecasters; financial analysts; GDP forecasts; published statistical forecasting models; statistics; U.S. Business Research Sources
• ISBN: 9781118865071; 1118865073
• DOI: 10.1002/9781119209584.ch2

Statistics courses are a standard element of every business school curriculum, so most business and financial forecasters share a similar academic training in the discipline. Statistics and economics texts can be intimidating if math is not one's favorite subject. Relatively sophisticated statistical techniques can be essential for disentangling cause and effect and for isolating historical impacts of potential causal factors. But such models are often easily accessed on public websites. Instead of reinventing the wheel, most business forecasters and financial analysts should use this research as the initial building blocks for their own forecasting needs. The first step in utilizing a forecast model is to select the model with the best historical statistical fit when using causal variables that either need not be predicted or are relatively easy to predict. Forecasters need benchmarks to evaluate the feedback required for critical learning from mistakes.