Uncertainty and models
Fan chart (forecast uncertainty)
Displays forecasts with nested probability or quantile bands around possible outcomes.
- Chart
- Uncertainty
- Forecasting
What it answers
What forecast outcomes are plausible and how uncertain are they?
- Shape
- Line with nested forecast bands
- What it shows
- Central trajectory and changing forecast spread.
Example
The question
How wide is the range of possible revenue next year?
Quarterly revenue with forecast range (EUR million)
Illustrative data. It belongs to no company.
When to use it
Use it when
Communicating forecast distributions over a horizon.
Avoid it when
When bands lack coverage definitions or are mistaken for guarantees.
How to read it
Read the central forecast and the probability labels on nested bands.
Note
State interval probabilities and what they cover.
The data you need
- Layout
- Wide interval table
- Fields
- Time: date; Forecast: number; Lower/Upper columns: paired numbers for each band
- One row is
- One forecast period with its central estimate and interval bounds. What is the grain?
- Rules
- Pair and label each interval coverage. Require Lower95 <= Lower80 <= Upper80 <= Upper95 for nested central bands.
- Optional
- Historical Actual values, model/version and forecast origin. Intervals must come from an appropriate model.
- Preparation
- Fit or obtain a suitable model/estimate first, then pair estimates with correctly labelled bounds or standard errors. Preserve coverage and scale information.
- Units
- Forecast value and bounds use native outcome units. Band percentages specify model coverage, not percentage of observed records.
Worked example
Forecast 100 with 80% band 90-110 and 95% band 80-120. Draw nested bands. The wider band has greater coverage under the model.
| Time | Forecast | Lower80 | Upper80 | Lower95 | Upper95 |
|---|---|---|---|---|---|
| 2026-11-01 | 100 | 90 | 110 | 80 | 120 |
| 2026-12-01 | 105 | 88 | 122 | 72 | 138 |