In this note the author discusses the problem of updating forecasts in a time-discrete forecasting model when information arrives between the current period and the next period. To use the information that arrives between two periods, he assumes that the process between two periods can be approximated by a linear interpolation of the time-discrete forecasting model. Based on this assumption the author drives the optimal updating rule for the forecast of the next period when new information arrives between the current period and the next period. He demonstrates by theoretical arguments and empirical examples that this updating rule is simple, intuitively appealing, defendable and useful.
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