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A Flexible Tool for Model Building: the Relevant Transformation of the Inputs Network Approach (RETINA)

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  • Teodosio Perez‐Amaral
  • Giampiero M. Gallo
  • Halbert White

Abstract

A new method, called Relevant Transformation of the Inputs Network Approach is proposed as a tool for model building. It is designed around flexibility (with nonlinear transformations of the predictors of interest), selective search within the range of possible models, out‐of‐sample forecasting ability and computational simplicity. In tests on simulated data, it shows both a high rate of successful retrieval of the data generating process, which increases with the sample size and a good performance relative to other alternative procedures. A telephone service demand model is built to show how the procedure applies on real data.

Suggested Citation

  • Teodosio Perez‐Amaral & Giampiero M. Gallo & Halbert White, 2003. "A Flexible Tool for Model Building: the Relevant Transformation of the Inputs Network Approach (RETINA)," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 821-838, December.
    • Handle: RePEc:bla:obuest:v:65:y:2003:i:s1:p:821-838
    DOI: 10.1046/j.0305-9049.2003.00096.x
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    References listed on IDEAS

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    1. West, Kenneth D, 1996. "Asymptotic Inference about Predictive Ability," Econometrica, Econometric Society, vol. 64(5), pages 1067-1084, September.
    2. Inoue, Atsushi & Kilian, Lutz, 2006. "On the selection of forecasting models," Journal of Econometrics, Elsevier, vol. 130(2), pages 273-306, February.
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    4. Raffaella Giacomini & Halbert White, 2006. "Tests of Conditional Predictive Ability," Econometrica, Econometric Society, vol. 74(6), pages 1545-1578, November.
    5. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    6. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
    7. Kevin D. Hoover & Stephen J. Perez, 1999. "Data mining reconsidered: encompassing and the general-to-specific approach to specification search," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 167-191.
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