The authors thank an anonymous referee, Jörg Breitung, Uwe Hassler, and Vladimir Kuzin for very helpful comments.
Incorporating Asymmetric Preferences into Fan Charts and Path Forecasts*
Article first published online: 17 SEP 2012
© 2012 The Department of Economics, University of Oxford and John Wiley & Sons, Ltd.
Oxford Bulletin of Economics and Statistics
Volume 76, Issue 2, pages 287–297, April 2014
How to Cite
Demetrescu, M. and Wang, M.-C. (2014), Incorporating Asymmetric Preferences into Fan Charts and Path Forecasts. Oxford Bulletin of Economics and Statistics, 76: 287–297. doi: 10.1111/j.1468-0084.2012.00723.x
- Issue published online: 7 MAR 2014
- Article first published online: 17 SEP 2012
- Final Manuscript Received: August 2012
Ordinary fan charts consist of symmetric marginal forecast intervals, and do not take into consideration the concrete loss function of the user of the forecast. The note shows how to build fan charts that have exact joint coverage even under asymmetric loss, and maintain at the same time the intuition conveyed by ordinary fan charts. The proposed method is computationally simple, and easily implemented with any loss function. The differences between the information conveyed by fan charts with or without asymmetries, and with or without exact joint coverage, are illustrated with a Bayesian forecast exercise of US GDP growth rates.