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Combining Forecasts with Nonparametric Kernel Regressions

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Author Info

  • Li Fuchun

    (Bank of Canada)

  • Tkacz Greg

    ()
    (Bank of Canada)

Abstract

We introduce a flexible nonparametric technique that can be used to select weights in a forecast-combining regression. We perform a Monte Carlo study that evaluates the performance of the proposed technique along with other linear and nonlinear forecast-combining procedures. The simulation results show that when forecast errors are correlated across models, the nonparametric weighting scheme dominates. As a general rule, our simulation results suggest that the practice of combining forecasts, no matter the technique employed in selecting the combination weights, can yield lower forecast errors on average. An application to inflation forecasting is also presented to demonstrate the use of all forecast-combining techniques.

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File URL: http://www.degruyter.com/view/j/snde.2004.8.4/snde.2004.8.4.1129/snde.2004.8.4.1129.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 8 (2004)
Issue (Month): 4 (December)
Pages: 1-18

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Handle: RePEc:bpj:sndecm:v:8:y:2004:i:4:n:2

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Cited by:
  1. John G. Galbraith & Greg Tkacz, 2006. "How Far Can We Forecast? Forecast Content Horizons For Some Important Macroeconomic Time Series," Departmental Working Papers, McGill University, Department of Economics 2006-13, McGill University, Department of Economics.
  2. David Jamieson Bolder & Yuliya Romanyuk, 2008. "Combining Canadian Interest-Rate Forecasts," Working Papers, Bank of Canada 08-34, Bank of Canada.
  3. Huiyu Huang & Tae-Hwy Lee, 2006. "To Combine Forecasts or to Combine Information?," Working Papers 200806, University of California at Riverside, Department of Economics, revised Feb 2009.
  4. John W. Galbraith & Greg Tkacz, 2007. "Forecast Content And Content Horizons For Some Important Macroeconomic Time Series," Departmental Working Papers, McGill University, Department of Economics 2007-01, McGill University, Department of Economics.

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