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Forecasting using predictive likelihood model averaging

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  • Kapetanios, George
  • Labhard, Vincent
  • Price, Simon

Abstract

Recently, there has been increasing interest in forecasting methods that utilise large datasets. We explore the possibility of forecasting with model averaging using the out-of-sample forecasting performance of various models in a frequentist setting, using the predictive likelihood. We apply our method to forecasting UK inflation and find that the new method performs well; in some respects it outperforms other averaging methods.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 91 (2006)
Issue (Month): 3 (June)
Pages: 373-379

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Handle: RePEc:eee:ecolet:v:91:y:2006:i:3:p:373-379

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References

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  1. Eklund, Jana & Karlsson, Sune, 2005. "Forecast Combination and Model Averaging Using Predictive Measures," CEPR Discussion Papers 5268, C.E.P.R. Discussion Papers.
  2. Wright, Jonathan H., 2008. "Bayesian Model Averaging and exchange rate forecasts," Journal of Econometrics, Elsevier, vol. 146(2), pages 329-341, October.
  3. Gary Koop & Simon Potter, 2003. "Forecasting in large macroeconomic panels using Bayesian Model Averaging," Staff Reports 163, Federal Reserve Bank of New York.
  4. Kapetanios, George & Labhard, Vincent & Price, Simon, 2008. "Forecasting Using Bayesian and Information-Theoretic Model Averaging: An Application to U.K. Inflation," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 33-41, January.
  5. Hamparsum Bozdogan, 1987. "Model selection and Akaike's Information Criterion (AIC): The general theory and its analytical extensions," Psychometrika, Springer, vol. 52(3), pages 345-370, September.
  6. Sin, Chor-Yiu & White, Halbert, 1996. "Information criteria for selecting possibly misspecified parametric models," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 207-225.
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Cited by:
  1. Liudas Giraitis & George Kapetanios & Simon Price, 2012. "Adaptive Forecasting in the Presence of Recent and Ongoing Structural Change," Working Papers 691, Queen Mary, University of London, School of Economics and Finance.
  2. Aman Ullah & Huansha Wang, 2013. "Parametric and Nonparametric Frequentist Model Selection and Model Averaging," Econometrics, MDPI, Open Access Journal, vol. 1(2), pages 157-179, September.
  3. David Jamieson Bolder & Yuliya Romanyuk, 2008. "Combining Canadian Interest-Rate Forecasts," Working Papers 08-34, Bank of Canada.
  4. Öğünç, Fethi & Akdoğan, Kurmaş & Başer, Selen & Chadwick, Meltem Gülenay & Ertuğ, Dilara & Hülagü, Timur & Kösem, Sevim & Özmen, Mustafa Utku & Tekatlı, Necati, 2013. "Short-term inflation forecasting models for Turkey and a forecast combination analysis," Economic Modelling, Elsevier, vol. 33(C), pages 312-325.
  5. Jana Eklund & George Kapetanios, 2008. "A Review of Forecasting Techniques for Large Data Sets," National Institute Economic Review, National Institute of Economic and Social Research, vol. 203(1), pages 109-115, January.
  6. repec:cty:dpaper:12/02 is not listed on IDEAS
  7. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007014, BANCO DE LA REPÚBLICA.
  8. Fouquau, Julien & Bessec, Marie & Méritet, Sophie, 2014. "Forecasting electricity spot prices using time-series models with a double temporal segmentation," Economics Papers from University Paris Dauphine 123456789/13532, Paris Dauphine University.
  9. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.
  10. Eliana González, . "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," Borradores de Economia 604, Banco de la Republica de Colombia.
  11. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007013, BANCO DE LA REPÚBLICA.
  12. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007015, BANCO DE LA REPÚBLICA.
  13. Ando, Tomohiro & Tsay, Ruey, 2010. "Predictive likelihood for Bayesian model selection and averaging," International Journal of Forecasting, Elsevier, vol. 26(4), pages 744-763, October.

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