Advanced Search
MyIDEAS: Login to save this article or follow this journal

Understanding and Comparing Factor-Based Forecasts

Contents:

Author Info

  • Jean Boivin

    (Columbia University and NBER)

  • Serena Ng

    (University of Michigan)

Abstract

Forecasting using "diffusion indices" has received a good deal of attention in recent years. The idea is to use the common factors estimated from a large panel of data to help forecast the series of interest. This paper assesses the extent to which the forecasts are influenced by (i) how the factors are estimated and/or (ii) how the forecasts are formulated. We find that for simple data-generating processes and when the dynamic structure of the data is known, no one method stands out to be systematically good or bad. All five methods considered have rather similar properties, though some methods are better in long-horizon forecasts, especially when the number of time series observations is small. However, when the dynamic structure is unknown and for more complex dynamics and error structures such as the ones encountered in practice, one method stands out to have smaller forecast errors. This method forecasts the series of interest directly, rather than the common and idiosyncratic components separately, and it leaves the dynamics of the factors unspecified. By imposing fewer constraints, and having to estimate a smaller number of auxiliary parameters, the method appears to be less vulnerable to misspecification, leading to improved forecasts.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ijcb.org/journal/ijcb05q4a4.htm
Download Restriction: no

File URL: http://www.ijcb.org/journal/ijcb05q4a4.pdf
Download Restriction: no

Bibliographic Info

Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 1 (2005)
Issue (Month): 3 (December)
Pages:

as in new window
Handle: RePEc:ijc:ijcjou:y:2005:q:4:a:4

Contact details of provider:
Postal: Centralbahnplatz 2, CH - 4002 Basel
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Email:
Web page: http://www.ijcb.org/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2005:q:4:a:4. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.