Composite Forecasting with Dirichlet Priors*
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In this paper, composite forecasting is considered from a Bayesian perspective. A forecast user combines two or more forecasts of an operationally relevant random variable. We consider the case where outperformance is modeled as a realization from a multinomial process. The user has prior beliefs about the probability that a particular method outperforms all others, information which is summarized by the Dirichlet distribution. An empirical example with hog prices in the United States illustrates the method. Copyright © 1988, Wiley Blackwell. All rights reserved
author list (cited authors)
Bessler, D. A., & Chamberlain, P. J.