Forecast Combinations

Aiolfi Marco, Carlos Capistrán () and Allan Timmermann

No 2010-04, Working Papers from Banco de México

Abstract: We consider combinations of subjective survey forecasts and model-based forecasts from linear and non-linear univariate specifications as well as multivariate factora-augmented models. Empirical results suggest that a simple equal-weighted average of survey forecasts outperform the best model-based forecasts for a majority of macroeconomic variables and forecast horizons. Additional improvements can in some cases be gained by using a simple equal-weighted average of survey and model-based forecasts. We also provide an analysis of the importance of model instability for explaining gains from forecast combination. Analytical and simulation results uncover break scenarios where forecast combinations outperform the best individual forecasting model.

JEL-codes: C53 E (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Forecast Combinations (2010)
Chapter: Forecast Combinations (2006)
Working Paper: Forecast Combinations (2005)
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