nep-for New Economics Papers
on Forecasting
Issue of 2007‒08‒14
three papers chosen by
Rob J Hyndman
Monash University

  1. Volatility Forecasting for Crude Oil Futures By M. Marzo; P. Zagaglia
  2. Global warming: Forecasts by scientists versus scientific forecasts By Green, Kesten C.; Armstrong, J. Scott
  3. Nearest Neighbor Conditional Estimation for Harris Recurrent Markov Chains By Sancetta, A.

  1. By: M. Marzo; P. Zagaglia
    Date: 2007–07
  2. By: Green, Kesten C.; Armstrong, J. Scott
    Abstract: In 2007, the Intergovernmental Panel on Climate Change’s Working Group One, a panel of experts established by the World Meteorological Organization and the United Nations Environment Programme, issued its Fourth Assessment Report. The Report included predictions of dramatic increases in average world temperatures over the next 92 years and serious harm resulting from the predicted temperature increases. Using forecasting principles as our guide we asked: Are these forecasts a good basis for developing public policy? Our answer is “no.” To provide forecasts of climate change that are useful for policy-making, one would need to forecast (1) global temperature, (2) the effects of any temperature changes, (3) the effects of alternative policies, and (4) whether the best policy would be successfully implemented. Proper forecasts of all four are necessary for rational policy making. The IPCC Report was regarded as providing the most credible long-term forecasts of global average temperatures by 31 of the 51 scientists and others involved in forecasting climate change who responded to our survey. We found no references to the primary sources of information on forecasting methods despite the fact these are easily available in books, articles, and websites. We audited the forecasting processes described in Chapter 8 of the IPCC’s WG1 Report to assess the extent to which they complied with forecasting principles. We found enough information to make judgments on 89 out of a total of 140 forecasting principles. The forecasting procedures that were described violated 72 principles. Many of the violations were, by themselves, critical. The forecasts in the Report were not the outcome of scientific procedures. In effect, they were the opinions of scientists transformed by mathematics and obscured by complex writing. Research on forecasting has shown that experts’ predictions are not useful. We have been unable to identify any scientific forecasts of global warming. Claims that the Earth will get warmer have no more credence than saying that it will get colder.
    Keywords: accuracy; audit; climate change; evaluation; expert judgment; mathematical models; public policy
    JEL: C53 H23 H21
    Date: 2007–08–03
  3. By: Sancetta, A.
    Abstract: This paper is concerned with consistent nearest neighbor time series estimation for data generated by a Harris recurrent Markov chain. The goal is to validate nearest neighbor estimation in this general time series context, using simple and weak conditions. The framework considered covers, in a unified manner, a wide variety of statistical quantities, e.g. autoregression function, conditional quantiles, conditional tail estimators and, more generally, extremum estimators. The focus is theoretical, but examples are given to highlight applications.
    Keywords: Nonparametric Estimation, Quantile Estimation, Semiparametric Estimation, Sequential Forecasting, Tail Estimation, Time Series.
    Date: 2007–07

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