Unbiased Forecast – What Is an Unbiased Forecast in Estimation and Forecasting?

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Assume we estimate a model from the data $(X, Y)$, with some estimator $W(X, Y)$, which is estimating parameters $\theta$ for the model we chose.

Then, we would like to perform a forecast for $Y_h$ from $X_h$ in the future. For this, we take the estimator $W(X, Y)$, and create another "estimator", or predictor, $T(W(X, Y), X_h)$ for forecasting the outcome $Y_h$ (this is how e.g. regression works).

However, the predictor itself is not a "traditional estimator", since it is guessing a random variable, not a parameter, like in standard inference. As such, there does not exist some "standard" measure of unbiasedness afaik.

For example, we could define unbiasedness for $W$ above as $E_{\theta}\big[W(X, Y)\big] = \theta$, where we simply take the expectation of the estimator over the data distribution given the parameter $\theta$ of the said distribution.

  1. How can we define forecast unbiasedness, e.g. in terms of expectations? Is there some textbook reference?

  2. If the estimated model is not linear regression, but e.g. GLM, or random forest, is the forecast unbiasedness defined the same way as for linear regression?

If possible, use the notation I introduced.

Best Answer

We can write your predictor for $Y_h$ as $$ \widehat{Y_h}=T\left(W(x,y),X_h\right) $$ Then $\widehat{Y_h}$ is unbiased as a predictor for $Y_h$ if $$ \DeclareMathOperator{\E}{\mathbb{E}} \E \{\widehat{Y_h} - Y_h \} =0 $$ where the expectation is calculated according to the joint distribution of all involved random variables.