IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Optimal Combination of Survey Forecasts

  • Cristina Conflitti
  • Christine De Mol
  • Domenico Giannone

We consider the problem of optimally combining individual forecasts of gross domestic product (GDP) and inflation from the Survey of Professional Forecasters (SPF) dataset for the Euro Area. Contrary to the common practice of using equal combination weights, we compute optimal weights which minimize the mean square forecast error (MSFE) in the case of point forecasts and maximize a logarithmic score in the case of density forecasts. We show that this is a viable strategy even when the number of forecasts to combine gets large, provided we constrain these weights to be positive and to sum to one. Indeed, this enforces a form of shrinkage on the weights which ensures good out-of-sample performance of the combined forecasts.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/124527/1/2012-023-CONFLITTI_DEMOL_GIANNONE-optimal.pdf
Download Restriction: no

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2012-023.

as
in new window

Length: 18 p.
Date of creation: Aug 2012
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/124527
Contact details of provider: Postal: Av. F.D., Roosevelt, 39, 1050 Bruxelles
Phone: (32 2) 650 30 75
Fax: (32 2) 650 44 75
Web page: http://difusion.ulb.ac.be

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Geweke, John & Amisano, Gianni, 2009. "Optimal Prediction Pools," Working Paper Series 1017, European Central Bank.
  2. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2011. "Combining Predictive Densities using Bayesian Filtering with Applications to US Economics Data," Tinbergen Institute Discussion Papers 11-003/4, Tinbergen Institute.
  3. Anne-Sofie Jore & James Mitchell & Shaun P. Vahey, 2008. "Combining forecast densities from VARs with uncertain instabilities," Working Paper 2008/01, Norges Bank.
  4. De Mol, Christine & Giannone, Domenico & Reichlin, Lucrezia, 2006. "Forecasting using a large number of predictors: Is Bayesian regression a valid alternative to principal components?," Working Paper Series 0700, European Central Bank.
  5. Hall, Stephen G. & Mitchell, James, 2007. "Combining density forecasts," International Journal of Forecasting, Elsevier, vol. 23(1), pages 1-13.
  6. Sloughter, J. McLean & Gneiting, Tilmann & Raftery, Adrian E., 2010. "Probabilistic Wind Speed Forecasting Using Ensembles and Bayesian Model Averaging," Journal of the American Statistical Association, American Statistical Association, vol. 105(489), pages 25-35.
  7. Victor DeMiguel & Lorenzo Garlappi & Raman Uppal, 2009. "Optimal Versus Naive Diversification: How Inefficient is the 1-N Portfolio Strategy?," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1915-1953, May.
  8. Todd E. Clark & Michael W. McCracken, 2006. "Averaging forecasts from VARs with uncertain instabilities," Research Working Paper RWP 06-12, Federal Reserve Bank of Kansas City.
  9. Kenneth Wallis, 2011. "Combining forecasts - forty years later," Applied Financial Economics, Taylor & Francis Journals, vol. 21(1-2), pages 33-41.
  10. Hansen, Bruce E., 2008. "Least-squares forecast averaging," Journal of Econometrics, Elsevier, vol. 146(2), pages 342-350, October.
  11. Jeremy Smith & Kenneth F. Wallis, 2009. "A Simple Explanation of the Forecast Combination Puzzle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(3), pages 331-355, 06.
  12. Anthony Tay & Kenneth F. Wallis, 2000. "Density Forecasting: A Survey," Econometric Society World Congress 2000 Contributed Papers 0370, Econometric Society.
  13. Gianni Amisano & Raffaella Giacomini, 2005. "Comparing Density Forecsts via Weighted Likelihood Ratio Tests," Working Papers ubs0504, University of Brescia, Department of Economics.
  14. John Geweke & Gianni Amisano, 2012. "Prediction with Misspecified Models," American Economic Review, American Economic Association, vol. 102(3), pages 482-86, May.
  15. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2011. "Combining Predictive Densities using Bayesian Filtering with Applications to US Economics Data," Tinbergen Institute Discussion Papers 11-003/4, Tinbergen Institute.
  16. Genre, Véronique & Kenny, Geoff & Meyler, Aidan & Timmermann, Allan, 2010. "Combining the forecasts in the ECB survey of professional forecasters: can anything beat the simple average?," Working Paper Series 1277, European Central Bank.
  17. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eca:wpaper:2013/124527. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.