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Forecasting Using Predictive Likelihood Model Averaging

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Author Info

  • George Kapetanios

    ()
    (Queen Mary, University of London)

  • Vincent Labhard

    ()
    (Bank of England)

  • Simon Price

    ()
    (Bank of England and City University)

Abstract

Recently, there has been increasing interest in forecasting methods that utilise large datasets. We explore the possibility of forecasting with model averaging using the out-of-sample forecasting performance of various models in a frequentist setting, using the predictive likelihood. We apply our method to forecasting UK inflation and find that the new method performs well; in some respects it outperforms other averaging methods.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp567.pdf
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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 567.

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Date of creation: Sep 2006
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Handle: RePEc:qmw:qmwecw:wp567

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Keywords: Forecasting; Inflation; Bayesian model averaging; Akaike criterion; Forecast combining;

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References

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  1. Gary Koop & Simon Potter, 2003. "Forecasting in Large Macroeconomic Panels using Bayesian Model Averaging," Discussion Papers in Economics 04/16, Department of Economics, University of Leicester.
  2. Hamparsum Bozdogan, 1987. "Model selection and Akaike's Information Criterion (AIC): The general theory and its analytical extensions," Psychometrika, Springer, vol. 52(3), pages 345-370, September.
  3. George Kapetanios & Vincent Labhard & Simon Price, 2005. "Forecasting using Bayesian and information theoretic model averaging: an application to UK inflation," Bank of England working papers 268, Bank of England.
  4. Wright, Jonathan H., 2008. "Bayesian Model Averaging and exchange rate forecasts," Journal of Econometrics, Elsevier, vol. 146(2), pages 329-341, October.
  5. Eklund, Jana & Karlsson, Sune, 2005. "Forecast Combination and Model Averaging Using Predictive Measures," CEPR Discussion Papers 5268, C.E.P.R. Discussion Papers.
  6. Sin, Chor-Yiu & White, Halbert, 1996. "Information criteria for selecting possibly misspecified parametric models," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 207-225.
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Cited by:
  1. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007014, BANCO DE LA REPÚBLICA.
  2. Kurmas Akdogan & Selen Baser & Meltem Gulenay Chadwick & Dilara Ertug & Timur Hulagu & Sevim Kosem & Fethi Ogunc & M. Utku Ozmen & Necati Tekatli, 2012. "Short-Term Inflation Forecasting Models For Turkey and a Forecast Combination Analysis," Working Papers 1209, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  3. Jana Eklund & George Kapetanios, 2008. "A Review of Forecasting Techniques for Large Data Sets," National Institute Economic Review, National Institute of Economic and Social Research, vol. 203(1), pages 109-115, January.
  4. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007015, BANCO DE LA REPÚBLICA.
  5. Aman Ullah & Huansha Wang, 2013. "Parametric and Nonparametric Frequentist Model Selection and Model Averaging," Econometrics, MDPI, Open Access Journal, vol. 1(2), pages 157-179, September.
  6. David Jamieson Bolder & Yuliya Romanyuk, 2008. "Combining Canadian Interest-Rate Forecasts," Working Papers 08-34, Bank of Canada.
  7. Liudas Giraitis & George Kapetanios & Simon Price, 2012. "Adaptive Forcasting in the Presence of Recent and Ongoing Structural Change," CAMA Working Papers 2012-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  8. Eliana González, . "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," Borradores de Economia 604, Banco de la Republica de Colombia.
  9. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.
  10. Fouquau, Julien & Bessec, Marie & Méritet, Sophie, 2014. "Forecasting electricity spot prices using time-series models with a double temporal segmentation," Economics Papers from University Paris Dauphine 123456789/13532, Paris Dauphine University.
  11. Eliana González, 2010. "Bayesian Model Averaging. An Application to Forecast Inflation in Colombia," BORRADORES DE ECONOMIA 007013, BANCO DE LA REPÚBLICA.
  12. Ando, Tomohiro & Tsay, Ruey, 2010. "Predictive likelihood for Bayesian model selection and averaging," International Journal of Forecasting, Elsevier, vol. 26(4), pages 744-763, October.
  13. repec:cty:dpaper:12/02 is not listed on IDEAS

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