Forecasting daily political opinion polls using the fractionally cointegrated vector auto‐regressive model

We examine forecasting performance of the recent fractionally cointegrated vector auto‐regressive (FCVAR) model. We use daily polling data of political support in the UK for 2010–2015 and compare with popular competing models at several forecast horizons. Our findings show that the four variants of the FCVAR model considered are generally ranked as the top four models in terms of forecast accuracy, and the FCVAR model significantly outperforms both univariate fractional models and the standard cointegrated vector auto‐regressive model at all forecast horizons. The relative forecast improvement is higher at longer forecast horizons, where the root‐mean‐squared forecast error of the FCVAR model is up to 15% lower than that of the univariate fractional models and up to 20% lower than that of the cointegrated vector auto‐regressive model. In an empirical application to the 2015 UK general election, the estimated common stochastic trend from the model follows the vote share of the UK Independence Party very closely, and we thus interpret it as a measure of Euroscepticism in public opinion rather than an indicator of the more traditional left–right political spectrum. In terms of prediction of vote shares in the election, forecasts generated by the FCVAR model leading to the election appear to provide a more informative assessment of the current state of public opinion on electoral support than the hung Parliament prediction of the opinion poll.