Judgmental reconciliation of hierarchical forecasts

Producing forecasts at different hierarchical levels (company-level, sector-level, SKU-level) using different aggregations of the data can lead to substantial differences. Various statistical reconciliation approaches have been considered. The bottom-up approach suggests that forecasts should be produced at the lowest level of aggregation (SKU-level) and forecasts at higher levels are derived by simply aggregating the lower-level forecasts. On the other hand,…