Forecast Intervals & Uncertainty Flashcards
1
Q
What is a forecast interval?
A
A range around a forecast that reflects uncertainty in the prediction.
2
Q
Why are forecast intervals wider than confidence intervals?
A
They account for both estimation error and future shocks.
3
Q
What happens to forecast interval width as the horizon increases?
A
it gets wider due to accumulating uncertainty.
4
Q
What is the general form of a 95% forecast interval?
A
Forecast ± 1.96 × forecast standard error.
5
Q
Why do we care about forecast intervals?
A
They help us understand how reliable our forecasts are.
