Combining expert forecasts : Can anything beat the simple average ?

This paper explores the gains from combining surveyed expert forecasts using the ECB Survey of Professional Forecasters (SPF). The analysis encompasses combinations based on principal components and trimmed means, performance-based weighting, least squares estimates of optimal weights as well as Bayesian shrinkage. For GDP growth and the unemployment rate, only few of the individual forecast combination schemes outperform the simple equally weighted average forecast in a pseudo-out-of-sample analysis, while for the inflation rate there is stronger evidence of improvement over this benchmark. Nonetheless, when we account for the effect of multiple model comparisons through White’s reality check, the results caution against any assumption that the identified improvements would persist in the future.

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