Is more data better?
Conventional wisdom usually suggests that agents should use all the data they have to make the best possible prediction. In this paper, it is shown that agents may make better predictions by discarding old data if their model is mis-specified. The applicability of the results to some economic models is also demonstrated.
|Date of creation:||Jul 2004|
|Date of revision:||Jul 2004|
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References listed on IDEAS
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- Honkapohja, S. & Mitra, K., 1999.
"Learning with Bounded Memory in Stochastic Models,"
University of Helsinki, Department of Economics
456, Department of Economics.
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- George W. Evans & Seppo Honkapohja, 1993. "Adaptive forecasts, hysteresis, and endogenous fluctuations," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
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