How to Choose among Three Forecasting Models: Machine Learning, Statistical and Expert - Bain & Company

Forecasting methods usually fall into three categories: statistical models, machine learning models and expert forecasts, with the first two being automated and the latter being manual. Statistical methods, including time series models and regression analysis, are considered traditional, while machine learning methods, such as neural network, random forest and the gradient-boosting model, are more modern. Yet when selecting a forecasting method, the "modern vs. traditional" or "automated vs. manual" comparisons can mislead. Preferences will depend on the modeler's training: Those with data science training will prefer machine learning models, while modelers with business backgrounds have more trust in expert forecasts. In fact, each of the three methods has different strengths and can play important roles in forecasting.