nep-for New Economics Papers
on Forecasting
Issue of 2006‒03‒05
six papers chosen by
Rob J Hyndman
Monash University
  1. Forecasting Performance of an Open Economy Dynamic Stochastic General Equilibrium Model By Mattias Villani; Malin Adolfson; Jesper Linde
  2. Regime Switching and Artificial Neural Network Forecasting of the Cyprus Stock Exchange Daily Returns By Georgios Kouretas; Eleni Constantinou; Robert Georgiades; Avo Kazandjian
  3. The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output By Kevin Joseph Carey; Evan Tanner
  4. Detecting and Predicting Forecast Breakdowns* By Raffella Giacomini; Barbara Rossi
  5. Valuing Volatility Spillovers By George Milunovich; Susan Thorp
  6. Model Uncertainty and Bayesian Model Averaging in Vector Autoregressive Processes By Rodney W. Strachan; Herman K. van Dijk
  1. By: Mattias Villani (Sveriges Riksbank); Malin Adolfson (Sveriges Riksbank); Jesper Linde (Sveriges Riksbank)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:32&r=for
  2. By: Georgios Kouretas (University of Crete); Eleni Constantinou (The Philips College, Cyprus); Robert Georgiades (The Philips College, Cyprus); Avo Kazandjian (The Philips College, Cyprus)
    Date: 2005–09–03
    URL: http://d.repec.org/n?u=RePEc:mmf:mmfc05:46&r=for
  3. By: Kevin Joseph Carey; Evan Tanner
    Keywords: Taxes , Economic forecasting , Fiscal policy , Production ,
    Date: 2005–11–16
    URL: http://d.repec.org/n?u=RePEc:imf:imfwpa:05/207&r=for
  4. By: Raffella Giacomini (University of California); Barbara Rossi (Los Angeles)
    Date: 2005–12–01
    URL: http://d.repec.org/n?u=RePEc:cla:uclawp:845&r=for
  5. By: George Milunovich (Department of Economics, Macquarie University); Susan Thorp (School of Finance and Economics, University of Technology, Sydney)
    Abstract: We measure the reduction in realized portfolio risk that can be achieved by allowing for volatility spillover in forecasts of equity covariance. The conditional second moment matrix of equity returns for pairs of major European equity markets is estimated via two asymmetric dynamic conditional correlation models (A-DCC): the unrestricted model includes volatility spillover e¤ects and the restricted model does not. Data are daily returns on the London, Frankfurt and Paris equity market price indices synchronized at London 16:00 time. Covariance forecasts from the restricted and unrestricted models are combined with assumed expected returns to compute e¢ cient three-asset portfolios (two equity indices and the risk-free asset). The impact of expected return choice on out-of-sample portfolio e¢ ciency is minimized via the polar co-ordinates method of Engel and Colacito (2004), which allows expected equity returns to span all relatives. Out-of-sample realized portfolio returns and variances from e¢ cient portfolios are computed and tested. Allowing for volatility spillover e¤ects produces small, statistically signi.cant reductions in portfolio risk. Portfolio standard deviations for the unrestricted model are at most one per cent smaller than standard deviations for restricted models. Significant risk reductions persist across daily, weekly, and monthly rebalancing horizons. Tests for second degree stochastic dominance indicate that realized returns from portfolios based on the volatility spillover model would be preferred by risk averse agents.
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:mac:wpaper:0506&r=for
  6. By: Rodney W. Strachan; Herman K. van Dijk
    Abstract: Economic forecasts and policy decisions are often informed by empirical analysis based on econometric models. However, inference based upon a single model, when several viable models exist, limits its usefulness. Taking account of model uncertainty, a Bayesian model averaging procedure is presented which allows for unconditional inference within the class of vector autoregressive (VAR) processes. Several features of VAR process are investigated. Measures on manifolds are employed in order to elicit uniform priors on subspaces defined by particular structural features of VARs. The features considered are the number and form of the equilibrium economic relations and deterministic processes. Posterior probabilities of these features are used in a model averaging approach for forecasting and impulse response analysis. The methods are applied to investigate stability of the "Great Ratios" in U.S. consumption, investment and income, and the presence and effects of permanent shocks in these series. The results obtained indicate the feasibility of the proposed method.
    Keywords: Posterior probability; Grassman manifold; Orthogonal group; Cointegration; Model averaging; Stochastic trend; Impulse response; Vector autoregressive model.
    JEL: C11 C32 C52
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:lec:leecon:06/5&r=for
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