Bayesian forecasting with highly correlated predictors
AbstractThis paper considers Bayesian variable selection in regressions with a large number of possibly highly correlated macroeconomic predictors. I show that by acknowledging the correlation structure in the predictors can improve forecasts over existing popular Bayesian variable selection algorithms.
Download InfoIf 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.
Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2012_12.
Date of creation: Jul 2012
Date of revision:
Bayesian semiparametric selection; Dirichlet process prior; correlated predictors; clustered coefficients;
Other versions of this item:
- Korobilis, Dimitris, 2013. "Bayesian forecasting with highly correlated predictors," Economics Letters, Elsevier, vol. 118(1), pages 148-150.
- Dimitris Korobilis, 2012. "Bayesian Forecasting with Highly Correlated Predictors," Working Paper Series 67_12, The Rimini Centre for Economic Analysis.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-ECM-2012-11-17 (Econometrics)
- NEP-ETS-2012-11-17 (Econometric Time Series)
- NEP-FOR-2012-11-17 (Forecasting)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dunson, David B. & Herring, Amy H. & Engel, Stephanie M., 2008. "Bayesian Selection and Clustering of Polymorphisms in Functionally Related Genes," Journal of the American Statistical Association, American Statistical Association, vol. 103, pages 534-546, June.
- Wright, Jonathan H., 2008.
"Bayesian Model Averaging and exchange rate forecasts,"
Journal of Econometrics,
Elsevier, vol. 146(2), pages 329-341, October.
- Jonathan H. Wright, 2003. "Bayesian Model Averaging and exchange rate forecasts," International Finance Discussion Papers 779, Board of Governors of the Federal Reserve System (U.S.).
- Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
- Carmen Fernandez & E Ley & Mark F J Steel, 2004.
"Benchmark priors for Bayesian models averaging,"
ESE Discussion Papers
66, Edinburgh School of Economics, University of Edinburgh.
- Stock, James H. & Watson, Mark W., 1999.
Journal of Monetary Economics,
Elsevier, vol. 44(2), pages 293-335, October.
- George, Edward I. & Sun, Dongchu & Ni, Shawn, 2008. "Bayesian stochastic search for VAR model restrictions," Journal of Econometrics, Elsevier, vol. 142(1), pages 553-580, January.
- Dimitris Korobilis, 2013.
"Var Forecasting Using Bayesian Variable Selection,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 28(2), pages 204-230, 03.
- KOROBILIS, Dimitris, 2011. "VAR forecasting using Bayesian variable selection," CORE Discussion Papers 2011022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dimitris Korobilis, 2010. "VAR Forecasting Using Bayesian Variable Selection," Working Paper Series 51_10, The Rimini Centre for Economic Analysis, revised Apr 2011.
- Korobilis, Dimitris, 2009. "VAR forecasting using Bayesian variable selection," MPRA Paper 21124, University Library of Munich, Germany.
- Gary Koop & Simon Potter, 2004. "Forecasting in dynamic factor models using Bayesian model averaging," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 550-565, December.
- Goodness C. Aye & Rangan Gupta, 2013. "Forecasting the US Real Private Residential Fixed Investment Using Large Number of Predictors," Working Papers 201348, University of Pretoria, Department of Economics.
- Dimitris, Korobilis, 2013. "Forecasting with Factor Models: A Bayesian Model Averaging Perspective," MPRA Paper 52724, University Library of Munich, Germany.
- Nombulelo Gumata, Alain Kabundi and Eliphas Ndou, 2013. "Important Channels of Transmission Monetary Policy Shock in South Africa," Working Papers 375, Economic Research Southern Africa.
- Korobilis, Dimitris, 2014.
"Data-based priors for vector autoregressions with drifting coefficients,"
53772, University Library of Munich, Germany.
- Dimitris Korobilis, 2014. "Data-based priors for vector autoregressions with drifting coefficients," Working Papers 2014_04, Business School - Economics, University of Glasgow.
- Gary Koop, 2012.
"Using VARs and TVP-VARs with Many Macroeconomic Variables,"
Central European Journal of Economic Modelling and Econometrics,
CEJEME, vol. 4(3), pages 143-167, September.
- Gary, Koop, 2013. "Using VARs and TVP-VARs with Many Macroeconomic Variables," SIRE Discussion Papers 2013-35, Scottish Institute for Research in Economics (SIRE).
- Gary Koop, 2013. "Using VARs and TVP-VARs with Many Macroeconomic Variables," Working Papers 1303, University of Strathclyde Business School, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeanette Findlay).
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.