Incorporating Asymmetric Preferences into Fan Charts and Path Forecasts*

Abstract

Ordinary fan charts consist of symmetric marginal forecast intervals, and do not take into consideration the concrete loss function of the user of the forecast. The note shows how to build fan charts that have exact joint coverage even under asymmetric loss, and maintain at the same time the intuition conveyed by ordinary fan charts. The proposed method is computationally simple, and easily implemented with any loss function. The differences between the information conveyed by fan charts with or without asymmetries, and with or without exact joint coverage, are illustrated with a Bayesian forecast exercise of US GDP growth rates.

Is the recent increase in national homicide abnormal? Testing the application of fan charts in monitoring national homicide trends over time

“…Outside of criminology and criminal justice, fan charts have been used in forecasting inflation (Álvarez & Sánchez, 2019;Wallis, 1999), projecting GDP (Cronin & Dowd, 2013;Demetrescu & Wang, 2014) and public debt (Fukač & Kirkby, 2017;Paret, 2017), analyzing stock prices (Clements, Izan, & Lan, 2013), and identifying potential banking crises (Lang & Schmidt, 2016). All are problems that have to be addressed by public policy in a timely manner.…”