nep-for New Economics Papers
on Forecasting
Issue of 2010‒11‒06
four papers chosen by
Rob J Hyndman
Monash University

  1. Forecast Revisions of Mexican Inflation and GDP Growth By Carlos Capistrán; Gabriel López-Moctezuma
  2. Robust Estimation and Forecasting of the Capital Asset Pricing Model By Guorui Bian; Michael McAleer; Wing-Keung Wong
  3. What Drives Commodity Prices? By Shu-Ling Chen; John D. Jackson; Hyeongwoo Kim; Pramesti Resiandini
  4. Forecasting Short-Run Inflation Volatility using Futures Prices: An Empirical Analysis from a Value at Risk Perspective By Marcelo Delajara

  1. By: Carlos Capistrán; Gabriel López-Moctezuma
    Abstract: We analyze forecasts of inflation and GDP growth contained in Banco de México's Survey of Professional Forecasters for the period 1995-2009. The forecasts are for the current and the following year, comprising an unbalanced three-dimensional panel with multiple individual forecasters, target years, and forecast horizons. The fixed-event nature of the forecasts enables us to examine efficiency by looking at the revision process. The panel structure allows us to control for aggregate shocks and to construct a measure of the news that impacted expectations in the period under study. The results suggest that respondents seem to rely for longer than appears to be optimal on their previous forecasts, and that they do not seem to use past information in an efficient manner. In turn, this means there are areas of opportunity to improve the accuracy of the forecasts, for instance, by taking into account the positive autocorrelation found in forecast revisions.
    Keywords: Evaluating forecasts, Inflation forecasting, Macroeconomic forecasting, Panel data, Surveys.
    JEL: C23 C53 E37
    Date: 2010–10
  2. By: Guorui Bian (Department of Statistics, East China Normal University); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University); Wing-Keung Wong (Department of Economics, Hong Kong Baptist University)
    Abstract: In this paper, we develop a modified maximum likelihood (MML) estimator for the multiple linear regression model with underlying student t distribution. We obtain the closed form of the estimators, derive the asymptotic properties, and demonstrate that the MML estimator is more appropriate for estimating the parameters of the Capital Asset Pricing Model by comparing its performance with least squares estimators (LSE) on the monthly returns of US portfolios. The empirical results reveal that the MML estimators are more efficient than LSE in terms of the relative efficiency of one-step-ahead forecast mean square error in small samples.
    Keywords: Maximum likelihood estimators, Modified maximum likelihood estimators, Student t family, Capital asset pricing model, Robustness.
    JEL: C1 C2 G1
    Date: 2010–10
  3. By: Shu-Ling Chen; John D. Jackson; Hyeongwoo Kim; Pramesti Resiandini
    Abstract: This paper examines common forces driving the prices of 51 highly tradable commodities. We demonstrate that highly persistent movements of these prices are mostly due to the first common component, which is closely related to the US nominal exchange rate. In particular, our simple factor-based model outperforms the random walk model in out-of-sample forecast for the US exchange rate. The second common factor and de-factored idiosyncratic components are consistent with stationarity, implying short-lived deviations from the equilibrium price dynamics. In concert, these results provide an intriguing resolution to the apparent inconsistency arising from stable markets with nonstationary prices.
    Keywords: Commodity Prices, US Nominal Exchange Rate, PANIC, Cross-Section Dependence, Out-of-Sample Forecast
    JEL: C53 F31
    Date: 2010–10
  4. By: Marcelo Delajara
    Abstract: Using various statistical measures we estimate the degree of comovement and cyclical synchronization of formal employment across Mexican states. As a measure of formal employment we use the number of workers with permanent contracts registered at the Instituto Mexicano del Seguro Social in each state between July 1997 and April 2009. We find that Mexican states are highly heterogeneous with respect to the degree of employment comovement and the association between the state and national employment. Only in 11 of the 32 states we find that fluctuations in state employment are highly synchronized between them and with national employment. These states are located in the northern border with the United States, in the center west and in the center of the country. Additionally, we find evidence of employment comovement, albeit much weaker, in 4 states located in the vicinity of Mexico City. In the rest of the states, employment fluctuations are unrelated to national employment or other states' employment fluctuations.
    Keywords: Employment, cycles, comovement, states, regions, Mexico.
    JEL: E32 R11 R23
    Date: 2010–10

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