Forecasting with Unobserved Heterogeneity

Matteo Richiardi

No 123, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: Forecasting based on random intercepts models requires imputation of the individual permanent effects to the simulated individuals. When these individuals enter the simulation with a history of past outcomes this involves sampling from conditional distributions, which might be unfeasible. I present a method for drawing individual permanent effects from a conditional distribution which only requires to invert the corresponding estimated unconditional distribution. While the algorithms currently available in the literature require polynomial time, the proposed method only requires matching two ranks and works therefore in N lnN time.

Keywords: forecasting; microsimulation; random intercept models; unobserved heterogeneity (search for similar items in EconPapers)
JEL-codes: C15 C53 C63 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cmp, nep-ecm and nep-for
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:cca:wplabo:123

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