On Selection of Components for a Diffusion Index Model: It's not the Size, It's How You Use It

Boriss Siliverstovs and Konstantin Kholodilin ()

No 598, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper suggests a novel approach to pre-selection of the component series of the diffusion index based on their individual forecasting performance. It is shown that this targeted selection allows substantially improving the forecasting ability compared to the diffusion index models that are based on the largest available dataset.

Keywords: Diffusion index; forecasting; optimal subset of data (search for similar items in EconPapers)
JEL-codes: C10 E32 (search for similar items in EconPapers)
Pages: 18 p.
Date: 2006
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mac
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Citations: View citations in EconPapers (3)

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Journal Article: On selection of components for a diffusion index model: it's not the size, it's how you use it (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp598

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