Combining expert-adjusted forecasts

It is well known that a combination of model-based forecasts can improve upon each of the individual constituent forecasts. Most forecasts available in practice are, however, not purely based on econometric models but entail adjustments, where experts with domain-specific knowledge modify the original model forecasts. There is much evidence that expert-adjusted forecasts do not necessarily improve the pure model-based forecasts. In this paper we show, however, that combined expert-adjusted model forecasts can improve on combined model forecasts, in the case when the individual expert-adjusted forecasts are not better than their associated model-based forecasts. We discuss various implications of this finding.