Chapter

Principles of Forecasting

Volume 30 of the series International Series in Operations Research & Management Science pp 59-80

Improving Judgment in Forecasting

  • Nigel HarveyAffiliated withDepartment of Psychology, University College London

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Abstract

Principles designed to improve judgment in forecasting aim to minimize inconsistency and bias at different stages of the forecasting process (formulation of the forecasting problem, choice of method, application of method, comparison and combination of forecasts, assessment of uncertainty in forecasts, adjustment of forecasts, evaluation of forecasts). The seven principles discussed concern the value of checklists, the importance of establishing agreed criteria for selecting forecast methods, retention and use of forecast records to obtain feedback, use of graphical rather than tabular data displays, the advantages of fitting lines through graphical displays when making forecasts, the advisability of using multiple methods to assess uncertainty in forecasts, and the need to ensure that people assessing the chances of a plan’s success are different from those who develop and implement it.

Key words

Cognitive biases confidence forecasting heuristics judgment