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on Forecasting |
| By: | Christiane Baumeister; Lutz Kilian; Thomas K. Lee |
| Abstract: | The answer as to whether there are gains from pooling real-time oil price forecasts depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single mostaccurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The mean-squared prediction error of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts, and we compare these forecasts duringkey historical episodes. |
| Keywords: | Econometric and statistical methods; International topics |
| JEL: | Q43 C53 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:14-46&r=for |
| By: | Ben Nasr, Adnen; Lux, Thomas; Ajmi, Ahdi Noomen; Gupta, Rangan |
| Abstract: | The financial crisis has fueled interest in alternatives to traditional asset classes that might be less a ected by large market gyrations and, thus, provide for a less volatile development of a portfolio. One attempt at selecting stocks that are less prone to extreme risks, is obeyance of Islamic Sharia rules. In this light, we investigate the statistical properties of the Dow Jones Islamic Stock Market Index (DJIM) and explore its volatility dynamics using a number of up-to-date statistical models allowing for long memory and regime-switching dynamics. We find that the DJIM shares all stylized facts of traditional asset classes, and estimation results and forecasting performance for various volatility models are also in line with prevalent findings in the literature. Overall, the relatively new Markov-switching multifractal model performs best under the majority of time horizons and loss criteria. Long memory GARCH-type models always improve upon the short-memory GARCH specification and additionally allowing for regime changes can further improve their performance. |
| Keywords: | Islamic finance,volatility dynamics,long memory,multifractals |
| JEL: | G15 G17 G23 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fmpwps:2&r=for |
| By: | Chiara Sabelli; Michele Pioppi; Luca Sitzia; Giacomo Bormetti |
| Abstract: | We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for a finite number of time to maturity buckets, we propose a modelling framework which is inherently discrete. In particular, we show how to approximate the HJM continuous time description of the multi-curve dynamics by a Vector Autoregressive process of order one. The resulting dynamics lends itself to a feasible estimation of the model volatility-correlation structure. Then, resorting to the Principal Component Analysis we further simplify the dynamics reducing the number of covariance components. Applying the constant volatility version of our model on a sample of curves from the Euro area, we demonstrate its forecasting ability through an out-of-sample test. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1411.3977&r=for |
| By: | Wladimir Andreff (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | Econometric modelling of Winter Olympic Games to explain sporting outcomes with economic variables, then predicting the medal distribution at the next Games, Sochi 2014. |
| Keywords: | sports economics, sporting outcome, prediction, modelling, Winter Olympic Games |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00971788&r=for |
| By: | Ubilava, David |
| Abstract: | The recent global financial crisis and the subsequent economic recession have revitalized the discussion on the causal relationship between financial and economic sectors. This study examines financial and economic indices developed by the Federal Reserve Banks of Kansas City and Chicago, respectively, to identify the impact of financial uncertainty on the overall economic performance. Using smooth transition and vector smooth transition autoregressions, this research assesses nonlinear dynamics of these indices, and tests the Granger non-causality hypothesis between the financial stress and economic activity in an out-of-sample setting. Results of this study confirm the causal relationship between financial and economic indices. Moreover, the improved in-sample fit of nonlinear models translates into better forecast performance, in comparison with the linear models, in an out-of-sample setting as well. |
| Keywords: | business cycles, financial stress, forecast evaluation, Granger causality, smooth transition modelling, Demand and Price Analysis, Financial Economics, Research Methods/ Statistical Methods, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170222&r=for |
| By: | Michal Andrle; Roberto Garcia-Saltos; Giang Ho |
| Abstract: | This paper studies economic and financial spillovers from the euro area to Poland in a two-country semi-structural model. The model incorporates various channels of macrofinancial linkages and cross-border spillovers. We parameterize the model through an extensive calibration process, and provide a wide range of model properties and evaluation exercises. Simulation results suggest a prominent role of foreign demand shocks (euro area and global) in driving Poland’s output, inflation and interest rate dynamics, particularly in recent years. Our model also has the capability for medium-term conditional forecasting and policy analysis. |
| Keywords: | Spillovers;Poland;Euro Area;Demand;External shocks;Business cycles;Cross country analysis;Econometric models;Poland, Euro area, semi-structural model, spillovers |
| Date: | 2014–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/186&r=for |
| By: | Woodard, Joshua D.; Verteramo Chiu, Leslie J.; Miller, Alyssa P. |
| Keywords: | Crop Production/Industries, Production Economics, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170692&r=for |
| By: | Wayne, James J. |
| Abstract: | Are financial markets predictable? How to predict the financial markets? These important questions are not answerable in the existing framework of either finance or economics. This paper shows in details that these questions are also not answerable in the existing framework of modern physics. In order to answer these important questions, this papers shows that one must develop a new interpretation of quantum mechanics which makes social science to be a branch of quantum physics like optics and chemistry. By critically examining the question how to predict the human behavior using Newtonian physics, special relativity, general relativity, thermodynamics, and QM with the Copenhagen interpretation, this paper reaches a stunning conclusion that the existing laws in all branches of physics can neither explain nor forecast the human behavior. This is the intolerable human behavior paradox facing physicists today: on one hand, the modern physics can explain and forecast the behavior of physical systems ranging from the tiniest elementary particles to the largest structures of the visible universe with amazing accuracy; on the other hand, ironically the existing physics cannot explain nor forecast the human behavior in our everyday life. The most important contribution of this paper is to prove that it is much easier to solve the measurement problem in QM, the human paradox, and many unanswerable questions in social science together than to solve them individually. This paper proposes a new interpretation, called JJW interpretation of QM, to replace the flawed Copenhagen interpretation and solve the measurement problem, human paradox, and many unanswerable questions in social science. The central points of JJW interpretation of QM is condensed into five new fundamental laws of physics, which are called physics laws of social science (PLSS). PLSS turns out to be a very powerful tool for social science because it reformulates every single problem in economics, politics, and other branches of social science into a physics problem. PLSS solves many outstanding fundamental questions in social science: how humanity should govern itself, whether the future can be forecasted, and how to predict the future. In economics, a fundamental equation of economics can be derived from PLSS. The fundamental equation of economics invalidates many popular economic theories and models, and concludes that the existing economics is not really a science without an extensive house cleaning. In political science, PLSS leads a conclusion that US constitution has many fundamental design flaws, and the permanent world peace is theoretically and practically feasible. Based on the extensive empirical evidence of human behavior supporting PLSS and the profound logical consequence of PLSS, this paper concludes that JJW interpretation is probably the correct interpretation of QM. This paper also shows that JJW interpretation of quantum mechanics is experimentally testable. |
| Keywords: | choices, uncertainty, prediction, information, equilibrium, indetermancy, quantum social science, interpretation of quantum mechanics, physics laws of social science |
| JEL: | A12 D5 D50 E1 E17 G0 H6 H62 |
| Date: | 2014–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59718&r=for |