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Combining forecasts, encompassing and the properties of UK macroeconomic forecasts

Author

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  • Ken Holden
  • John Thompson

Abstract

The idea of combining forecasts is of great interest to forecasters and a linear combination of different forecasts can be more accurate than any individual forecast. For model builders, forecast encompassing is a way of checking whether any extra important information is contained in forecasts from rival models. Efficient forecasts have errors which are unrelated to any information available when they are formed. Combinations of forecasts, forecast encompassing and efficiency tests can all be achieved by a restricted or unrestricted regression of outcomes on the separate forecasts. This paper links these three approaches and examines the implications for recent UK annual forecasts.

Suggested Citation

  • Ken Holden & John Thompson, 1997. "Combining forecasts, encompassing and the properties of UK macroeconomic forecasts," Applied Economics, Taylor & Francis Journals, vol. 29(11), pages 1447-1458.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:11:p:1447-1458
    DOI: 10.1080/000368497326273
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    References listed on IDEAS

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    Cited by:

    1. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    2. Mark Manfredo & Timothy Richards, 2009. "Hedging with weather derivatives: a role for options in reducing basis risk," Applied Financial Economics, Taylor & Francis Journals, vol. 19(2), pages 87-97.
    3. Laurent Ferrara, 2007. "Point and interval nowcasts of the Euro area IPI," Applied Economics Letters, Taylor & Francis Journals, vol. 14(2), pages 115-120.
    4. repec:lan:wpaper:470 is not listed on IDEAS
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    6. Palle S. Andersen, 1997. "Forecast errors and financial developments," BIS Working Papers 51, Bank for International Settlements.
    7. repec:lan:wpaper:539557 is not listed on IDEAS
    8. repec:lan:wpaper:413 is not listed on IDEAS
    9. Jef Vuchelen & Maria-Isabel Gutierrez, 2005. "Do the OECD 24 month horizon growth forecasts for the G7-countries contain information?," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 855-862.

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