Chapter

Principles of Forecasting

Volume 30 of the series International Series in Operations Research & Management Science pp 81-106

Improving Reliability of Judgmental Forecasts

  • Thomas R. StewartAffiliated withCenter for Policy Research, Nelson A. Rockefeller College of Public Affairs and Policy, University at Albany, State University of New York

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Abstract

All judgmental forecasts will be affected by the inherent unreliability, or inconsistency, of the judgment process. Psychologists have studied this problem extensively, but forecasters rarely address it. Researchers and theorists describe two types of unreliability that can reduce the accuracy of judgmental forecasts: (1) unreliability of information acquisition, and (2) unreliability of information processing. Studies indicate that judgments are less reliable when the task is more complex; when the environment is more uncertain; when the acquisition of information relies on perception, pattern recognition, or memory; and when people use intuition instead of analysis. Five principles can improve reliability in judgmental forecasting:
  1. 1.

    Organize and present information in a form that clearly emphasizes relevant information.

     
  2. 2.

    Limit the amount of information used in judgmental forecasting. Use a small number of really important cues.

     
  3. 3.

    Use mechanical methods to process information.

     
  4. 4.

    Combine several forecasts.

     
  5. 5.

    Require justification of forecasts.

     

Keywords

Accuracy combining forecasts error information acquisition information processing psychometrics reliability