Forecasting with Econometric Methods: Folklore Versus Fact

12 Pages Posted: 9 Feb 2005 Last revised: 31 Dec 2011

See all articles by J. Scott Armstrong

J. Scott Armstrong

University of Pennsylvania - Marketing Department

Abstract

Evidence from social psychology suggests that econometricians will avoid evidence that disconfirms their beliefs. Two beliefs of econometricians were examined: (1) Econometric methods provide more accurate short-term forecasts than do other methods; and (2) more complex econometric methods yield more accurate forecasts. A survey of 21 experts in econometrics found that 95% agreed with the first statement and 72% agreed with the second. A review of the published empirical evidence yielded little support for either of the two statements in the 41 studies. The method of multiple hypotheses was suggested as a research strategy that will lead to more effective use of disconfirming evidence. Although this strategy was suggested in 1890, it has only recently been used by econometricians.

Keywords: Forecasting, econometric, methodology, social psychology

Suggested Citation

Armstrong, J. Scott, Forecasting with Econometric Methods: Folklore Versus Fact. Journal of Business, Vol. 51, No. 4, pp. 549-564, 1978. Available at SSRN: https://ssrn.com/abstract=664063

J. Scott Armstrong (Contact Author)

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-5087 (Phone)
215-898-2534 (Fax)

HOME PAGE: http://marketing.wharton.upenn.edu/people/faculty/armstrong.cfm

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