A Model for the Interpretation of Verbal Predictions

There is a marked gap between the demands on forecasting and the results that numerical forecasting techniques usually can provide. It is suggested that this gap can be closed by the implementation of experts' qualitative predictions into numerical forecasting systems. A formal analysis of these predictions can then be integrated into quantitative forecasts. In the framework of possibility theory, a model is developed which accounts for the verbal judgments in situations where predictions are made or knowledge is updated in the light of new information. The model translates verbal expressions into elastic constraints on a numerical scale. This numerical interpretation of qualitative judgments can then be implemented into numerical forecasting procedures. The applicability of this model was tested experimentally. The results indicate that the numerical predictions from the model agree well with the actual judgments and the evaluation behavior of the subjects. The applicability of this model is demonstrated in a study where bank clerks had to predict exchange rates. The analysis of qualitative judgments according to this model provided significantly more information than numerical predictions. A general framework for an interactive forecasting systems is suggested for further developments.