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Do ‘big losses’ in judgmental adjustments to statistical forecasts affect experts’ behaviour?

Petropoulos, Fotios, Fildes, Robert and Goodwin, Paul 2016. Do ‘big losses’ in judgmental adjustments to statistical forecasts affect experts’ behaviour? European Journal of Operational Research 249 (3) , pp. 842-852. 10.1016/j.ejor.2015.06.002

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The behaviour of poker players and sports gamblers has been shown to change after winning or losing a significant amount of money on a single hand. In this paper, we explore whether there are changes in experts’ behaviour when performing judgmental adjustments to statistical forecasts and, in particular, examine the impact of ‘big losses’. We define a big loss as a judgmental adjustment that significantly decreases the forecasting accuracy compared to the baseline statistical forecast. In essence, big losses are directly linked with wrong direction or highly overshooting judgmental overrides. Using relevant behavioural theories, we empirically examine the effect of such big losses on subsequent judgmental adjustments exploiting a large multinational data set containing statistical forecasts of demand for pharmaceutical products, expert adjustments and actual sales. We then discuss the implications of our findings for the effective design of forecasting support systems, focusing on the aspects of guidance and restrictiveness.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HA Statistics
Publisher: Elsevier
ISSN: 0377-2217
Date of First Compliant Deposit: 30 March 2016
Date of Acceptance: 2 June 2015
Last Modified: 09 Jul 2020 15:01

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