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Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
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http://hdl.handle.net/10419/39335
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| Title: | | On economic evaluation of directional forecasts  |
| Authors: | | Blaskowitz, Oliver J. Herwartz, Helmut |
| Issue Date: | | 2009 |
| Series/Report no.: | | SFB 649 discussion paper 2009,052 |
| Abstract: | | It is commonly accepted that information is helpful if it can be exploited to improve a decision making process. In economics, decisions are often based on forecasts of up- or downward movements of the variable of interest. We point out that directional forecasts can provide a useful framework to assess the economic forecast value when loss functions (or success measures) are properly formulated to account for realized signs and realized magnitudes of directional movements. We discuss a general approach to evaluate (directional) forecasts which is simple to implement, robust to outlying or unreasonable forecasts and which provides an economically interpretable loss/success functional framework. As such, the measure of directional forecast value is a readily available alternative to the commonly used squared error loss criterion. |
| Subjects: | | Directional forecasts directional forecast value forecast evaluation economic forecast value mean squared forecast error mean absolute forecast error |
| JEL: | | C52 E17 E27 E37 E47 F17 F37 F47 G17 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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