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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.

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  • 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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    1. Kock, Anders Bredahl & Teräsvirta, Timo, 2014. "Forecasting performances of three automated modelling techniques during the economic crisis 2007–2009," International Journal of Forecasting, Elsevier, vol. 30(3), pages 616-631.
    2. Eduardo Acosta-González & Fernando Fernández-Rodríguez, 2014. "Forecasting Financial Failure of Firms via Genetic Algorithms," Computational Economics, Springer;Society for Computational Economics, vol. 43(2), pages 133-157, February.
    3. Savin Ivan, 2013. "A Comparative Study of the Lasso-type and Heuristic Model Selection Methods," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(4), pages 526-549, August.
    4. Jennifer Castle & David Hendry, 2013. "Semi-automatic Non-linear Model selection," Economics Series Working Papers 654, University of Oxford, Department of Economics.
    5. Massimiliano Marinucci & Teodosio Pérez-Amaral, 2005. "Econometric Modeling of Business Telecommunications Demand using RETINA and Finite Mixtures," Econometrics 0505003, University Library of Munich, Germany, revised 16 May 2005.
    6. Jurgen A. Doornik, 2008. "Encompassing and Automatic Model Selection," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 915-925, December.
    7. Anders Bredahl Kock & Timo Teräsvirta, 2016. "Forecasting Macroeconomic Variables Using Neural Network Models and Three Automated Model Selection Techniques," Econometric Reviews, Taylor & Francis Journals, vol. 35(8-10), pages 1753-1779, December.
    8. Castle Jennifer L. & Doornik Jurgen A & Hendry David F., 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-33, February.
    9. Gernot Doppelhofer & Xavier Sala I Martin & Melvyn Weeks, 2005. "Jointness of Determinants of Economics Growth," Money Macro and Finance (MMF) Research Group Conference 2005 54, Money Macro and Finance Research Group.
    10. Ivan Savin & Peter Winker, 2012. "Heuristic Optimization Methods for Dynamic Panel Data Model Selection: Application on the Russian Innovative Performance," Computational Economics, Springer;Society for Computational Economics, vol. 39(4), pages 337-363, April.
    11. Marcin Blazejowski & Pawel Kufel & Tadeusz Kufel, 2009. "Automatic Procedure of Building Congruent Dynamic Model in Gretl," EHUCHAPS, in: Ignacio Díaz-Emparanza & Petr Mariel & María Victoria Esteban (ed.), Econometrics with gretl. Proceedings of the gretl Conference 2009, edition 1, chapter 5, pages 75-89, Universidad del País Vasco - Facultad de Ciencias Económicas y Empresariales.
    12. Doppelhofer, G. & Weeks, M., 2005. "Jointness of Growth Determinants," Cambridge Working Papers in Economics 0542, Faculty of Economics, University of Cambridge.
    13. David F. Hendry & Hans‐Martin Krolzig, 2004. "We Ran One Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 799-810, December.
    14. Castle, Jennifer L. & Doornik, Jurgen A. & Hendry, David F., 2012. "Model selection when there are multiple breaks," Journal of Econometrics, Elsevier, vol. 169(2), pages 239-246.
    15. Andreas Sachs & Frauke Schleer, 2013. "Labour Market Performance in OECD Countries: A Comprehensive Empirical Modelling Approach of Institutional Interdependencies. WWWforEurope Working Paper No. 7," WIFO Studies, WIFO, number 46851, February.
    16. Camila Epprecht & Dominique Guegan & Álvaro Veiga & Joel Correa da Rosa, 2017. "Variable selection and forecasting via automated methods for linear models: LASSO/adaLASSO and Autometrics," Post-Print halshs-00917797, HAL.
    17. Camila Epprecht & Dominique Guegan & Álvaro Veiga, 2013. "Comparing variable selection techniques for linear regression: LASSO and Autometrics," Documents de travail du Centre d'Economie de la Sorbonne 13080, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    18. Sachs, Andreas & Schleer, Frauke, 2013. "Labour market performance in OECD countries: A comprehensive empirical modelling approach of institutional interdependencies," ZEW Discussion Papers 13-040, ZEW - Leibniz Centre for European Economic Research.
    19. Eduardo Acosta-González & Fernando Fernández-Rodríguez & Hicham Ganga, 2019. "Predicting Corporate Financial Failure Using Macroeconomic Variables and Accounting Data," Computational Economics, Springer;Society for Computational Economics, vol. 53(1), pages 227-257, January.
    20. Camila Epprecht & Dominique Guegan & Álvaro Veiga & Joel Correa da Rosa, 2017. "Variable selection and forecasting via automated methods for linear models: LASSO/adaLASSO and Autometrics," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00917797, HAL.
    21. Jennifer Castle & David Hendry, 2010. "Automatic Selection for Non-linear Models," Economics Series Working Papers 473, University of Oxford, Department of Economics.
    22. Ericsson Neil R., 2016. "Testing for and estimating structural breaks and other nonlinearities in a dynamic monetary sector," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(4), pages 377-398, September.

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