Tuesday, April 1, 2008

Forecasting or Palm Reading?

A study says that
forecasting “experts” don’t do much better than novices — or, for that matter, guessing — when it comes to predicting the future.
I've been taking a forecasting class, and find the topic rather fascinating. However, as in the course of my study of different forecasting methods, it seems that in a lot of cases the best forecast is the naive forecast - which is simply guessing using current values.

I suppose what it really comes down to is that most things cannot be predicted with great accuracy - how else would we have surprises and excitements in life?! However, it does pay to spend time to analyze information or data that would greatly influence a person/company's decision. If one can find a good forecasting model, then great - life is easy! If not, then at least you know you cannot forecast it well. Move on and don't waste money finding "experts" for forecasts. This is when one needs to consider contingency plans very carefully to deal with variability!

For more information on the study mentioned above: http://blogs.wsj.com/numbersguy/grading-the-forecasts-of-experts-182/?mod=hpp_us_blogs

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