Economic Theory

Bayesian Forecasting and Dynamic Models by Mike West

By Mike West

This article is worried with Bayesian studying, inference and forecasting in dynamic environments. We describe the constitution and thought of sessions of dynamic versions and their makes use of in forecasting and time sequence research. the foundations, types and strategies of Bayesian forecasting and time - ries research were constructed widely over the past thirty years. Thisdevelopmenthasinvolvedthoroughinvestigationofmathematicaland statistical features of forecasting versions and comparable thoughts. With this has come adventure with purposes in a number of components in advertisement, commercial, scienti?c, and socio-economic ?elds. a lot of the technical - velopment has been pushed via the desires of forecasting practitioners and utilized researchers. consequently, there now exists a comparatively whole statistical and mathematical framework, offered and illustrated right here. In writing and revising this booklet, our fundamental ambitions were to provide a fairly complete view of Bayesian principles and techniques in m- elling and forecasting, quite to supply a great reference resource for complex college scholars and learn staff.

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Example text

A typical example in marketing is when a novel market campaign is carried out. Initially, prospective intervention is undertaken to communicate the predicted effects which are likely to involve increased sales estimates and associated uncertainties over the campaign period. This is necessary in order to ensure that appropriate stocks will be available. The progress of the campaign's effect will be suitably monitored. Then, some time after completion, the campaign will be retrospectively assessed in order to increase the store of market knowledge.

Extensions were sanctioned, and throughout the next decade, regretted. From the mid 1970's onwards capacity in Western Europe was generally between 30 and 40% over capacity and in 1979 estimated forecasts continually lowered, finally reaching the region of the 470 mark. 2. The above example is not mentioned as an isolated case but as typical of decision makers. 7 shows how official forecasts for ethylene production were continually reduced over the years throughout the 1970's (Source: Financial Times, August 9th 1978).

The beliefs represented are those of an individual, the forecaster or modeller responsible for the provision of forecast information. Many underlying principles and features of the Bayesian approach are identified and described throughout the book in the contexts of various forecasting models and problems. Routine manipulation of collections of probability distributions to identify those relevant to forecasting and related inferences are performed repeatedly. This provides a useful introduction to Bayesian ideas more generally for the inexperienced reader, though is no substitute for more substantial introductions such as can be found in the works of Lindley (1965), De Groot (1971) and Berger (1985).

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