In theory, there is no difference between theory and practice. But, in practice, there is.
Benjamin Brewster (1882)
Abstract. Forecasting has always been at the forefront of decision making and planning. The uncertainty that surrounds the future is both exciting and challenging, with individuals and organisations seeking to min- imise risks and maximise utilities. The large number of forecasting applications calls for a diverse set of forecasting methods to tackle real-life challenges. This article provides a non-systematic review of the the- ory and the practice of forecasting. We provide an overview of a wide range of theoretical, state-of-the-art models, methods, principles, and approaches to prepare, produce, organise, and evaluate forecasts. We then demonstrate how such theoretical concepts are applied in a variety of real-life contexts.
We do not claim that this review is an exhaustive list of methods and applications. However, we wish that our encyclopedic presentation will offer a point of reference for the rich work that has been undertaken over the last decades, with some key insights for the future of forecasting theory and practice. Given its encyclopedic nature, the intended mode of reading is non-linear. We offer cross-references to allow the readers to navigate through the various topics. We complement the theoretical concepts and applications covered by large lists of free or open-source software implementations and publicly-available databases. Keywords: review; encyclopedia; methods; applications; principles; time series; prediction.
It is natural for people to desire certainty. When probability forecasts of precipitation were first dis- seminated widely, many were very sceptical about them, with some accusing the forecasters of hedging and saying “Don’t give me a probability. I want to know if it’s going to rain or not”. Of course, point forecasts often are given along with probability forecasts. The current frequent exposure to probabilities helps the general public better understand, appreciate, and feel more comfortable with them. And the current situation in the world with COVID-19, increases in huge fires, big storms, political polarisation, international conflicts, etc., should help them realise that we are living in an age with huge uncertainties, and forecasts that quantify these uncertainties can be important. Where possible, visualisation can help, as indicated by the saying that a picture is worth a thousand words. Examples are the cones of uncertainty on maps in forecasts of the speed, severity, and future path of hurricanes, and the time line of the probability of a team winning a game, updated quickly after each play.
Put simply, this is an exciting time for the field of forecasting with all of the new theoretical develop- ments and forecasting applications in practice. Forecasting is so ubiquitous that it’s not possible to cover all of these developments in a single article. This article manages to cover quite a few, and a good variety. Using short presentations for each one from an expert “close to the ground” on that theoretical topic or field of practice works well to provide a picture of the current state of the art in forecasting theory and practice.
Petropoulos, F. et al. Forecasting: theory and practice, 2020.
Authors. Fotios Petropoulos, Daniele Apiletti, Vassilios Assimakopoulos, Mohamed Zied Babai, Devon K. Barrow, Souhaib Ben Taieb, Christoph Bergmeir, Ricardo J. Bessa, Jakub Bijak, John E. Boylan, Jethro Browell, Claudio Carnevale, Jennifer L. Castle, Pasquale Cirillo, Michael P. Clements, Clara Cordeiro, Fernando Luiz Cyrino Oliveira, Shari De Baets, Alexander Dokumentov, Joanne Ellison, Piotr Fiszeder, Philip Hans Franses, David T. Frazier, Michael Gilliland, M. Sinan Gönül, Paul Goodwin, Luigi Grossi, Yael Grushka-Cockayne, Mariangela Guidolin, Massimo Guidolin, Ulrich Gunter, Xiaojia Guo, Renato Guseo, Nigel Harvey, David F. Hendry, Ross Hollyman, Tim Januschowski, Jooyoung Jeon, Victor Richmond R. Jose, Yanfei Kang, Anne B. Koehler, Stephan Kolassa, Nikolaos Kourentzes, Sonia Leva, Feng Li, Konstantia Litsiou, Spyros Makridakis, Gael M. Martin, Andrew B. Martinez, Sheik Meeran, Theodore Modis, Konstantinos Nikolopoulos, Dilek Önkal, Alessia Paccagnini, Anastasios Panagiotelis, Ioannis Panapakidis, Jose M. Pavía, Manuela Pedio, Diego J. Pedregal, Pierre Pinson, Patrícia Ramos, David E. Rapach, J. James Reade, Bahman Rostami-Tabar, Michał Rubaszek, Georgios Sermpinis, Han Lin Shang, Evangelos Spiliotis, Aris A. Syntetos, Priyanga Dilini Talagala, Thiyanga S. Talagala, Len Tashman, Dimitrios Thomakos, Thordis Thorarinsdottir, Ezio Todini, Juan Ramón Trapero Arenas, Xiaoqian Wang, Robert L. Winkler, Alisa Yusupova, Florian Ziel