The Use of Encompassing Tests for Forecast Combinations

Turgut Kisinbay

No 2007/264, IMF Working Papers from International Monetary Fund

Abstract: The paper proposes an algorithm that uses forecast encompassing tests for combining forecasts. The algorithm excludes a forecast from the combination if it is encompassed by another forecast. To assess the usefulness of this approach, an extensive empirical analysis is undertaken using a U.S. macroecoomic data set. The results are encouraging as the algorithm forecasts outperform benchmark model forecasts, in a mean square error (MSE) sense, in a majority of cases.

Keywords: WP; data set; simple average; algorithm forecast; null hypothesis; RMSE gain (search for similar items in EconPapers)
Pages: 21
Date: 2007-11-01
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Citations: View citations in EconPapers (5)

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Journal Article: The use of encompassing tests for forecast combinations (2010)
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