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It is not structural breaks that earn average forecasts their fame

Author

Listed:
  • Dirk Ulbricht

    (institut für finanzdienstleistungen (iff))

Abstract

Structural change is a major challenge to the applied forecaster and a potential source of large forecast errors. Large forecasting competitions demonstrate the success of combined forecasts of simple linear models over forecasting devices that endogenously model structural change. Thereby, most studies look at the average performance over time, not at or around structural changes. However, is it really reliability in the presence of structural breaks that gives average forecasts an edge over their competitors? An analysis of real-time forecasts of UK inflation indicates that it is not their break performance that earns combined forecasts their fame.

Suggested Citation

  • Dirk Ulbricht, 2016. "It is not structural breaks that earn average forecasts their fame," Economics Bulletin, AccessEcon, vol. 36(2), pages 1250-1259.
    • Handle: RePEc:ebl:ecbull:eb-14-00895
    as

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    References listed on IDEAS

    as
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    4. Egginton, Don M. & Pick, Andreas & Vahey, Shaun P., 2002. "'Keep it real!': a real-time UK macro data set," Economics Letters, Elsevier, vol. 77(1), pages 15-20, September.
    5. Luca Benati & George Kapetanios, 2003. "Structural Breaks in Inflation Dynamics," Computing in Economics and Finance 2003 169, Society for Computational Economics.
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    7. Tian, Jing & Anderson, Heather M., 2014. "Forecast combinations under structural break uncertainty," International Journal of Forecasting, Elsevier, vol. 30(1), pages 161-175.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    real-time experiment; forecast combination; breaks;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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