Forecasting VARs, model selection, and shrinkage

Christian Kascha () and Carsten Trenkler

No 15-07, Working Papers from University of Mannheim, Department of Economics

Abstract: This paper provides an empirical comparison of various selection and penalized regression approaches for forecasting with vector autoregressive systems. In particular, we investigate the effect of the system size as well as the effect of various prior specification choices on the relative and overall forecasting performance of the methods. The data set is a typical macroeconomic quarterly data set for the US. We find that these specification choices are crucial for most methods. Conditional on certain choices, the variation across different approaches is relatively small. There are only a few methods which are not competitive under any scenario. For single series, we find that increasing the system size can be helpful - depending on the employed shrinkage method.

Keywords: VAR Models; Forecasting; Model Selection; Shrinkage (search for similar items in EconPapers)
JEL-codes: C32 C53 E47 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ets, nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/38872/1/Kascha_und_Trenkler_15-07.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnh:wpaper:38872

Access Statistics for this paper

More papers in Working Papers from University of Mannheim, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().