Marketing Papers

Document Type

Journal Article

Date of this Version

July 2001

Abstract

When causal forces are specified, the expected direction of the trend can be compared with the trend based on extrapolation. Series in which the expected trend conflicts with the extrapolated trend are called contrary series. We hypothesized that contrary series would have asymmetric forecast errors, with larger errors in the direction of the expected trend. Using annual series that contained minimal information about causality, we examined 671 contrary forecasts. As expected, most (81%) of the errors were in the direction of the causal forces. Also as expected, the asymmetries were more likely for longer forecast horizons; for six-year-ahead forecasts, 89% of the forecasts were in the expected direction. The asymmetries were often substantial. Contrary series should be flagged and treated separately when prediction intervals are estimated, perhaps by shifting the interval in the direction of the causal forces.

Comments

Postprint version. Published in Journal of Forecasting, Volume 20, Issue 4, July 2001, pages 273-283.
Publisher URL: http://dx.doi.org/10.1002/for.794

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Date Posted: 14 June 2007

This document has been peer reviewed.