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Bayesian long-run prediction in time series models

  • Koop, Gary
  • Osiewalski, Jacek
  • Steel, Mark F. J.

This paper considers Bayesian long-run prediction in time series models. We allow time series to exhibit stationary or non-stationary behavior and show how differences between prior structures which have little effect on posterior inferences can have a large effect in a prediction exercise. In particular, the Jeffreys' prior given in Phillips (1991) is seen to prevent the existence of one-period ahead predictive moments. A Bayesian counterpart is provided to Sampson (1991) who takes parameter uncertainty into account in a classical framework. An empirical example illustrates our results.

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File URL: http://www.sciencedirect.com/science/article/pii/0304-4076(94)01662-J
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 69 (1995)
Issue (Month): 1 (September)
Pages: 61-80

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Handle: RePEc:eee:econom:v:69:y:1995:i:1:p:61-80
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  1. Peter C. Schotman & Herman K. van Dijk, 1991. "On Bayesian routes to unit roots," Discussion Paper / Institute for Empirical Macroeconomics 43, Federal Reserve Bank of Minneapolis.
  2. Fuller, Wayne A. & Hasza, David P., 1980. "Predictors for the first-order autoregressive process," Journal of Econometrics, Elsevier, vol. 13(2), pages 139-157, June.
  3. Osiewalski, J. & Steel, M.F.J., 1990. "Robust Bayesian inference in elliptical regression models," Discussion Paper 1990-32, Tilburg University, Center for Economic Research.
  4. Koop, G. & Steel, M.F.J., 1991. "A decision theoretic analysis of the unit root hypothesis using mixtures of elliptical models," Discussion Paper 1991-50, Tilburg University, Center for Economic Research.
  5. Dreze, Jacques H., 1977. "Bayesian regression analysis using poly-t densities," Journal of Econometrics, Elsevier, vol. 6(3), pages 329-354, November.
  6. DeJong, David N & Whiteman, Charles H, 1991. "The Temporal Stability of Dividends and Stock Prices: Evidence from the Likelihood Function," American Economic Review, American Economic Association, vol. 81(3), pages 600-617, June.
  7. Phillips, P C B, 1991. "To Criticize the Critics: An Objective Bayesian Analysis of Stochastic Trends," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(4), pages 333-64, Oct.-Dec..
  8. Chow, Gregory C, 1973. "Multiperiod Predictions from Stochastic Difference Equations by Bayesian Methods," Econometrica, Econometric Society, vol. 41(1), pages 109-18, January.
  9. Uhlig, Harald, 1994. "What Macroeconomists Should Know about Unit Roots: A Bayesian Perspective," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 645-671, August.
  10. Thompson, Patrick A & Miller, Robert B, 1986. "Sampling the Future: A Bayesian Approach to Forecasting from Univariate Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(4), pages 427-36, October.
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