IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Flexible Time Series Forecasting Using Shrinkage Techniques and Focused Selection Criteria

Nonlinear time series models can exhibit components such as long range trends and seasonalities that may be modeled in a flexible fashion. The resulting unconstrained maximum likelihood estimator can be too heavily parameterized and suboptimal for forecasting purposes. The paper proposes the use of a class of shrinkage estimators that includes the Ridge estimator for forecasting time series, with a special attention to GARCH and ACD models. The local large sample properties of this class of shrinkage estimators is investigated. Moreover, we propose symmetric and asymmetric focused selection criteria of shrinkage estimators. The focused information criterion selection strategy consists of picking up the shrinkage estimator that minimizes the estimated risk (e.g. MSE) of a given smooth function of the parameters of interest to the forecaster. The usefulness of such shrinkage techniques is illustrated by means of a simulation exercise and an intra-daily financial durations forecasting application. The empirical application shows that an appropriate shrinkage forecasting methodology can significantly outperform the unconstrained ML forecasts of rich flexible specifications.

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:
Download Restriction: no

Paper provided by Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti" in its series Econometrics Working Papers Archive with number wp2007_02.

in new window

Date of creation: May 2007
Handle: RePEc:fir:econom:wp2007_02
Contact details of provider: Postal:
Viale G.B. Morgagni, 59 - I-50134 Firenze - Italy

Phone: +39 055 2751500
Fax: +39 055 2751525
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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:fir:econom:wp2007_02. 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: (Francesco Calvori)

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.