THE IMPACT OF EMPIRICAL ACCURACY STUDIES ON TIME-SERIES ANALYSIS AND FORECASTING

This paper examines a major area of statistics: the application of tim e series analysis to forecasting, particularly as it applies to the ar eas of business and economics, This area is unusual in the social scie nces in that it permits objective, replicable and controlled experimen tation through empirical studies using real-life data, In this paper w e review the considerable empirical research carried out within the fi eld over the last two decades and compare the major findings of such r esearch with what may be expected if the accepted statistical paradigm held true, In doing so we note several anomalies which cannot be easi ly explained, Using citation analysis, we demonstrate that there has b een little theoretical work that has taken such findings into account, The result has been little or no progress in re-defining the dominant paradigm in time series statistics and progressing the field in the d irection of improved post-sample forecasting accuracy, We argue that w hether the objective is post-sample forecasting accuracy or model vali dation, the strong assumption usually made in the field of time series forecasting of constancy (or worse, stationarity) must be re-examined , For application-oriented and empirically-based researchers the need for a theoretical framework in which to develop improved forecasting m ethods and establish effective selection criteria is a necessity, Vari ous priority areas for research are described including robust modelli ng and the use of contextual information in model identification, The paper concludes with a challenge to theoretical time series statistici ans and empirical researchers alike: working together can they learn f rom each other? If successful, their conclusions should advance the fi eld to better serve those engaged in decision or policy making through the benefits from more accurate predictions, Equally important, forec asting competitions can provide researchers with an experimental test- bed that can direct the progress of their discipline and make it more useful and relevant for real life applications.