Local Prediction Pools

We propose local prediction pools as a method for combining the predictive distributions of a set of experts whose predictive abilities are believed to vary locally with respect to a set of pooling variables. To estimate the local predictive ability of each expert, we introduce the simple, fast, and interpretable caliper method. Expert pooling weights from the local prediction pool approaches the equal weight solution whenever there is little data on local predictive performance, making the pools robust and adaptive. Local prediction pools are shown to outperform the widely used optimal linear pools in a macroeconomic forecasting evaluation, and in predicting daily bike usage for a bike rental company.