I remember sitting in stats courses as an undergrad hearing about why extrapolation was a bad idea. Furthermore, there are a variety of sources online which comment on this. There's also a mention of it here.
Can anyone help me understand why extrapolation is a bad idea?
If it is, how is it that forecasting techniques aren't statistically invalid?
Best Answer
A regression model is often used for extrapolation, i.e. predicting the response to an input which lies outside of the range of the values of the predictor variable used to fit the model. The danger associated with extrapolation is illustrated in the following figure.
The regression model is “by construction” an interpolation model, and should not be used for extrapolation, unless this is properly justified.