Forecasting with Econometric Methods: Folklore Versus Fact

J. Scott Armstrong
1978 The journal of business  
Evidence from social psychology suggests that econometricians will avoid evidence that disconfirms their beliefs. Two beliefs of econometricians were examined: (1) Econometric methods provide more accurate short-term forecasts than do other methods; and (2) more complex econometric methods yield more accurate forecasts. A survey of 21 experts in econometrics found that 95% agreed with the first statement and 72%0 agreed with the second. A review of the published empirical evidence yielded
more » ... support for either of the two statements in the 41 studies. The method of multiple hypotheses was suggested as a research strategy that will lead to more effective use of disconfirming evidence. Although this strategy was suggested in 1890, it has only recently been used by econometricians. The tendency for intelligent adults to avoid disconfirming evidence was demonstrated by Wason (1960 Wason ( , 1968 . He provided three numbers (2, 4, 6) to subjects, and they were asked to determine what rule had been used to
doi:10.1086/296016 fatcat:xyix7w33k5b4bjbcythwhkm4d4