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Economic Criteria for Evaluating Commodity Price Forecasts

Published online by Cambridge University Press:  28 April 2015

Jeffrey H. Dorfman  and
Christopher S. Mcintosh
Jeffrey H. Dorfman
Affiliation:
Department of Agricultural and Applied Economics at the University of Georgia
Christopher S. Mcintosh
Affiliation:
Department of Agricultural and Applied Economics at the University of Georgia
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Abstract

Forecasts of economic time series are often evaluated according to their accuracy as measured by either quantitative precision or qualitative reliability. We argue that consumers purchase forecasts for the potential utility gains from utilizing them, not for their accuracy. Using Monte Carlo techniques to incorporate the temporal heteroskedasticity inherent in asset returns, the expected utility of a set of qualitative forecasts is simulated for corn and soybean futures prices. Monetary values for forecasts of various reliability levels are derived. The method goes beyond statistical forecast evaluation, allowing individuals to incorporate their own utility function and trading system into valuing a set of asset price forecasts.

Keywords

commodity pricesforecast evaluationvalue of information
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 29 , Issue 2 , December 1997 , pp. 337 - 345
Copyright
Copyright © Southern Agricultural Economics Association 1998

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