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Point and Density Forecasting of Macroeconomic and Financial Uncertainties of the United States

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometric & Allied Research, University of Ibadan, Ibadan, Nigeria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Ahamuefula E. Ogbonna

    (Centre for Econometric & Allied Research, University of Ibadan; Department of Statistics, University of Ibadan, Ibadan, Nigeria)

Abstract

We forecast macroeconomic and financial uncertainties of the US over the period of 1960:Q3 to 2018:Q4, based on a large data set of 303 predictors using a wide array of constant parameter and time varying models. We find that uncertainty is indeed forecastable, but while accurate point forecasts can be achieved without incorporating time-variation in the parameters of the small-scale models for macroeconomic uncertainty and large-scale models for financial uncertainty, it is indeed a requirement, along with a large data set, when producing precise density forecasts for both types of uncertainties.

Suggested Citation

  • Afees A. Salisu & Rangan Gupta & Ahamuefula E. Ogbonna, 2020. "Point and Density Forecasting of Macroeconomic and Financial Uncertainties of the United States," Working Papers 202058, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202058
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    References listed on IDEAS

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    Cited by:

    1. Salisu, Afees A. & Tchankam, Jean Paul, 2022. "US Stock return predictability with high dimensional models," Finance Research Letters, Elsevier, vol. 45(C).

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    More about this item

    Keywords

    Macroeconomic and financial uncertainties; large number of predictors; constant parameter and time-varying models; forecasting;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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