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Incorporating Asymmetric Preferences into Fan Charts and Path Forecasts


  • The authors thank an anonymous referee, Jörg Breitung, Uwe Hassler, and Vladimir Kuzin for very helpful comments.


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.