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Combining Forecasts with Nonparametric Kernel Regressions


  • Li Fuchun

    (Bank of Canada)

  • Tkacz Greg

    () (Bank of Canada)


We introduce a flexible nonparametric technique that can be used to select weights in a forecast-combining regression. We perform a Monte Carlo study that evaluates the performance of the proposed technique along with other linear and nonlinear forecast-combining procedures. The simulation results show that when forecast errors are correlated across models, the nonparametric weighting scheme dominates. As a general rule, our simulation results suggest that the practice of combining forecasts, no matter the technique employed in selecting the combination weights, can yield lower forecast errors on average. An application to inflation forecasting is also presented to demonstrate the use of all forecast-combining techniques.

Suggested Citation

  • Li Fuchun & Tkacz Greg, 2004. "Combining Forecasts with Nonparametric Kernel Regressions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(4), pages 1-18, December.
  • Handle: RePEc:bpj:sndecm:v:8:y:2004:i:4:n:2

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    References listed on IDEAS

    1. Swanson, Norman R & Zeng, Tian, 2001. "Choosing among Competing Econometric Forecasts: Regression-Based Forecast Combination Using Model Selection," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 425-440, September.
    2. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
    3. Spyros Makridakis & Robert L. Winkler, 1983. "Averages of Forecasts: Some Empirical Results," Management Science, INFORMS, vol. 29(9), pages 987-996, September.
    4. Deutsch, Melinda & Granger, Clive W. J. & Terasvirta, Timo, 1994. "The combination of forecasts using changing weights," International Journal of Forecasting, Elsevier, vol. 10(1), pages 47-57, June.
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    Cited by:

    1. John W. Galbraith & Greg Tkacz, 2007. "Forecast content and content horizons for some important macroeconomic time series," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 935-953, August.
    2. David Jamieson Bolder & Yuliya Romanyuk, 2008. "Combining Canadian Interest-Rate Forecasts," Staff Working Papers 08-34, Bank of Canada.
    3. Huiyu Huang & Tae-Hwy Lee, 2010. "To Combine Forecasts or to Combine Information?," Econometric Reviews, Taylor & Francis Journals, vol. 29(5-6), pages 534-570.
    4. John G. Galbraith & Greg Tkacz, 2006. "How Far Can We Forecast? Forecast Content Horizons For Some Important Macroeconomic Time Series," Departmental Working Papers 2006-13, McGill University, Department of Economics.

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