Non-Parametric Direct Multi-step Estimation for Forecasting Economic Processes
AbstractWe evaluate the asymptotic and finite-sample properties of direct multi-step estimation (DMS) for forecasting at several horizons. For forecast accuracy gains from DMS in finite samples, mis-specification and non-stationarity of the DGP are necessary, but when a model is well-specified, iterating the one-step ahead forecasts may not be asymptotically preferable. If a model is mis-specified for a non-stationary DGP, omitting either negative residual serial correlation or regime shifts, DMS can forecast more accurately. Monte Carlo simulations clarify the non-linear dependence of the estimation and forecast biases on the parameters of the DGP, and explain existing results.
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Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2004-W12.
Length: 27 pages
Date of creation: 24 May 2004
Date of revision:
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Web page: http://www.nuff.ox.ac.uk/economics/
Adaptive estimation; multi-step estimation; dynamic forecasts; model mis-specification.;
Other versions of this item:
- Chevillon, Guillaume & Hendry, David F., 2005. "Non-parametric direct multi-step estimation for forecasting economic processes," International Journal of Forecasting, Elsevier, vol. 21(2), pages 201-218.
- David Hendry & Guillaume Chevillon, 2004. "Non-Parametric Direct Multi-step Estimation for Forecasting Economic Processes," Economics Series Working Papers 196, University of Oxford, Department of Economics.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- 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-2004-07-11 (All new papers)
- NEP-ECM-2004-07-17 (Econometrics)
- NEP-ETS-2004-07-11 (Econometric Time Series)
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