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Model Averaging by Stacking

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  • Claudio, Morana

Abstract

The paper introduces a new Frequentist model averaging estimation procedure, based on a stacked OLS estimator across models, implementable on cross-sectional, panel, as well as time series data. The proposed estimator shows the same optimal properties of the OLS estimator under the usual set of assumptions concerning the population regression model. Relatively to available alternative approaches, it has the advantage of performing model averaging exante in a single step, optimally selecting models’ weight according to the MSE metric, i.e., by minimizing the squared Euclidean distance between actual and predicted value vectors. Moreover, it is straightforward to implement, only requiring the estimation of a single OLS augmented regression. By exploiting ex-ante a broader information set and benefiting of more degrees of freedom, the proposed approach yields more accurate and (relatively) more efficient estimation than available ex-post methods.

Suggested Citation

  • Claudio, Morana, 2015. "Model Averaging by Stacking," Working Papers 310, University of Milano-Bicocca, Department of Economics, revised 29 Oct 2015.
  • Handle: RePEc:mib:wpaper:310
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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper310.pdf
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    References listed on IDEAS

    as
    1. Claeskens,Gerda & Hjort,Nils Lid, 2008. "Model Selection and Model Averaging," Cambridge Books, Cambridge University Press, number 9780521852258, December.
    2. Bruce E. Hansen, 2007. "Least Squares Model Averaging," Econometrica, Econometric Society, vol. 75(4), pages 1175-1189, July.
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    Cited by:

    1. Donatella, Baiardi & Claudio, Morana, 2015. "Financial deepening and income distribution inequality in the euro area," Working Papers 316, University of Milano-Bicocca, Department of Economics, revised 04 Dec 2015.
    2. repec:eee:ecmode:v:70:y:2018:i:c:p:40-55 is not listed on IDEAS

    More about this item

    Keywords

    Model Averaging; Model Uncertainty;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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