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on Forecasting |
| By: | David F. Hendry |
| Abstract: | Unpredictability arises from intrinsic stochastic variation, unexpected instances of outliers, and unanticipated extrinsic shifts of distributions. We analyze their properties, relationships, and different effects on the three arenas in the title, which suggests considering three associated information sets. We note the implications of unanticipated shifts for forecasting, economic analyses of efficient markets, inter-temporal derivations, and general-to-specific model selection, tackling outliers and non-constancy by impulse-indicator saturation, and contrast the potential success in modeling breaks with the major difficulties confronting forecasting. |
| Keywords: | Unpredictability, 'Black Swans', distributional shfits, forecasing, model selection |
| JEL: | C51 C22 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:551&r=for |
| By: | Magnus Andersson (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Antonello D’Agostino (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Gabe J. de Bondt (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Moreno Roma (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines the out-of-sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the euro area. Our findings are that the predictive content of sectoral stock market indicators: i) is potentially strong, particularly for the financial sector, and is stronger than that of financial spreads; ii) varies over time, with a substantial improvement after 1999 for the euro area; iii) is stronger for investment than for private consumption; and iv) is stronger in the euro area than in the United States. JEL Classification: C53, E37, G12. |
| Keywords: | forecasting real GDP, consumption and investment, sectoral stock prices, stock market valuation metrics, US, Euro Area. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111343&r=for |
| By: | Antonio García Ferrer; Ester González Prieto; Daniel Peña |
| Abstract: | In this paper, we apply independent component analysis (ICA) for prediction and signal extraction in multivariate time series data. We compare the performance of three different ICA procedures, JADE, SOBI, and FOTBI that estimate the components exploiting either the non-Gaussianity, or the temporal structure of the data, or combining both, non-Gaussianity as well as temporal dependence. Some Monte Carlo simulation experiments are carried out to investigate the performance of these algorithms in order to extract components such as trend, cycle, and seasonal components. Moreover, we empirically test the performance of those three ICA procedures on capturing the dynamic relationships among the industrial production index (IPI) time series of four European countries. We also compare the accuracy of the IPI time series forecasts using a few JADE, SOBI, and FOTBI components, at different time horizons. According to the results, FOTBI seems to be a good starting point for automatic time series signal extraction procedures, and it also provides quite accurate forecasts for the IPIs. |
| Keywords: | ICA, Signal extraction, Multivariate time series, Forecasting |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws111611&r=for |
| By: | Bukhari, Syed Kalim Hyder; Abdul , Jalil; Rao, Nasir Hamid |
| Abstract: | This paper is an attempt to revisit the pioneering work of Riazuddin and Khan (2002). A complete business cycle has been elapsed (2002-2010) since their study, so there is need to review the results with additional information. This revisited attempt, based on a theoretically specified framework, arrived at similar results and found significant impact of Islamic calendar. The Islamic months of Ramadan and Zilhaj have positive impact on currency holdings and negative impact on deposits. Although stylized facts indicate that consumer prices are significantly higher during Ramadan but econometric investigation rejects the upward exogenous shifts in prices during Ramadan. Therefore, structural relationship analyzed in co-integration framework has shown that inflation is not directly impacted by the Ramadan but indirectly through increase in its determinants. Inflationary tendencies during Ramadan are not due to exogenous increase by producers and retailers but possibly due to demand surge in the wake of redistribution of income. The months of June and December have positive effects on deposits and negative effects on currency in circulation indicating the presence of window dressing. Finally, as seasonal factors have important role in determining economic time series, therefore, ignoring those in monthly time series models will lead to omitted variable bias and inappropriate forecasts. |
| Keywords: | currency in circulation; deposits; cointegration; seasonal factors |
| JEL: | C1 |
| Date: | 2011–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31124&r=for |
| By: | Demosthenes Ioannou (European Central Bank, DG International and European Relations, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Livio Stracca (European Central Bank, DG International and European Relations, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines the out-of-sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the euro area. Our findings are that the predictive content of sectoral stock market indicators: i) is potentially strong, particularly for the financial sector, and is stronger than that of financial spreads; ii) varies over time, with a substantial improvement after 1999 for the euro area; iii) is stronger for investment than for private consumption; and iv) is stronger in the euro area than in the United States. JEL Classification: E62, E63, H63, O43. |
| Keywords: | Stability and Growth Pact, Lisbon Strategy, euro area, European Union, governance, institutions. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111344&r=for |