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Testing for Model Selection in Predicting Aggregate Variables

Author

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  • Giacomo Sbrana

    (United Nations, Department of Economics and Social Affairs, Population Division)

Abstract

This paper focuses on the choice between aggregate and disaggregate models, consisting of both univariate and multivariate specifications, in predicting aggregate variables. A formal hypothesis testing procedure for in-sample model selection is suggested. The empirical size and power of the test are investigated via the use of Monte Carlo simulations. Empirical results show that the test has good performance not only when the competitive models are non-nested specifications, but also when considering nested competitors.

Suggested Citation

  • Giacomo Sbrana, 2007. "Testing for Model Selection in Predicting Aggregate Variables," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 66(1), pages 3-28, March.
    • Handle: RePEc:gde:journl:gde_v66_n1_p3-28
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    References listed on IDEAS

    as
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    4. Aigner, D.J. & Goldfeld, S.M., 1974. "Estimation and prediction from aggregate data when aggregates are measured more accurately than their components," LIDAM Reprints CORE 190, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Giacomo Sbrana, 2008. "On the use of area-wide models in the Euro-zone," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 17(4), pages 499-518, October.

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    More about this item

    Keywords

    aggregation; model evaluation and selection; hypothesis testing; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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