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Lasso-type and Heuristic Strategies in Model Selection and Forecasting

Author

Listed:
  • Ivan Savin

    () (DFG Research Training Program "The Economics of Innovative Change", Friedrich Schiller University Jena and Max Planck Institute of Economics)

  • Peter Winker

    () (Justus Liebig University Giessen, and Centre for European Economic Research, Mannheim)

Abstract

Several approaches for subset recovery and improved forecasting accuracy have been proposed and studied. One way is to apply a regularization strategy and solve the model selection task as a continuous optimization problem. One of the most popular approaches in this research field is given by Lasso-type methods. An alternative approach is based on information criteria. In contrast to the Lasso, these methods also work well in the case of highly correlated predictors. However, this performance can be impaired by the only asymptotic consistency of the information criteria. The resulting discrete optimization problems exhibit a high computational complexity. Therefore, a heuristic optimization approach (Genetic Algorithm) is applied. The two strategies are compared by means of a Monte-Carlo simulation study together with an empirical application to leading business cycle indicators in Russia and Germany.

Suggested Citation

  • Ivan Savin & Peter Winker, 2012. "Lasso-type and Heuristic Strategies in Model Selection and Forecasting," Jena Economic Research Papers 2012-055, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2012-055
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    File URL: http://www2.wiwi.uni-jena.de/Papers/jerp2012/wp_2012_055.pdf
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    References listed on IDEAS

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    1. Bai, Jushan & Ng, Serena, 2008. "Forecasting economic time series using targeted predictors," Journal of Econometrics, Elsevier, vol. 146(2), pages 304-317, October.
    2. Winker, Peter, 1995. "Identification of multivariate AR-models by threshold accepting," Computational Statistics & Data Analysis, Elsevier, vol. 20(3), pages 295-307, September.
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    Cited by:

    1. Savin Ivan, 2013. "A Comparative Study of the Lasso-type and Heuristic Model Selection Methods," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(4), pages 526-549, August.
    2. Kascha, Christian & Trenkler, Carsten, 2015. "Forecasting VARs, model selection, and shrinkage," Working Papers 15-07, University of Mannheim, Department of Economics.

    More about this item

    Keywords

    Adaptive Lasso; Elastic net; Forecasting; Genetic algorithms; Heuristic methods; Lasso; Model selection;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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