Data Analysis with R, Second Edition - Second Edition

Difficulties in forecasting

The final note I'd like to make about forecasting, before we move on, is how very hard it is. There are several reasons for this. One of the main reasons is that humans are extremely adept at picking up patterns where none actually exist. For example, humans were guided by evolution to be experts in seeing faces because it is so essential to our survival. This explains why humans tend to see faces in everything (the surface of the moon, a piece of toast, the bark of a tree). Bringing it back to the topic at hand, if you show the vast majority of people a completely random time series, they will pick up patterns among noise and extrapolate these artificial patterns into the future. And, more often than you might ...