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Is there a golden rule?

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>08/2015
<mark>Journal</mark>Journal of Business Research
Issue number8
Number of pages4
Pages (from-to)1742-1745
Publication StatusPublished
Early online date11/04/15
<mark>Original language</mark>English


Armstrong, Green, and Graefe (this issue) propose the Golden Rule in forecasting: “be conservative”. According to the authors, the successful application of the Golden Rule comes through a checklist of 28 guidelines. Even if the authors of this commentary embrace the main ideas around the Golden Rule, which targets to address the “average” situation, they believe that this rule should not be applied automatically. There is no universal extrapolation
method that can tackle every forecasting problem; nor are there simple rules that automatically apply without reference to the data. Similarly, it is demonstrated that for a specific causal regression model the recommended
conservative rule leads to unnecessary inaccuracy. In this commentary the authors demonstrate, using the power of counter examples, two cases where the Golden Rule fails. Forecasting performance is context dependent
and, as such, forecasters (researchers and practitioners) should take into account the specific features of the situation faced.