http://dx.doi.org/10.1016/j.jeconom.2013.11.003">
 

Document Type

Journal Article

Department/Unit

Department of Economics

Title

Is there an optimal forecast combination?

Language

English

Abstract

We consider several geometric approaches for combining forecasts in large samples - a simple eigenvector approach, a mean corrected eigenvector and trimmed eigenvector approach. We give conditions where geometric approach yields identical result as the regression approach. We also consider a mean and scale corrected simple average of all predictive models for finite sample and give conditions where simple average is an optimal combination. Monte Carlos are conducted to compare the finite sample performance of these and some popular forecast combination and information combination methods and to shed light on the issues of "forecast combination" vs "information combination". We also try to shed light on whether there exists an optimal forecast combination method by comparing various forecast combination methods to predict US real output growth rate and excess equity premium. © 2013 Elsevier B.V. All rights reserved.

Publication Date

2014

Source Publication Title

Journal of Econometrics

Volume

178

Issue

Part2

Start Page

294

End Page

309

Publisher

Elsevier

ISSN (print)

03044076

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