Comparing Alternative Predictors Based on Large-Panel Factor Models

D''Agostino, Antonello and Domenico Giannone ()
Authors registered in the RePEc Author Service: Antonello D'Agostino ()

No 6564, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper compares the predictive ability of the factor models of Stock and Watson (2002) and Forni, Hallin, Lippi, and Reichlin (2005) using a large panel of US macroeconomic variables. We propose a nesting procedure of comparison that clarifies and partially overturns the results of similar exercises in the literature. Our main conclusion is that for the dataset at hand the two methods have a similar performance and produce highly collinear forecasts.

Keywords: Factor Models; Forecasting; Large Cross-Section (search for similar items in EconPapers)
JEL-codes: C31 C52 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-for
Date: 2007-11
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Related works:
Working Paper: Comparing Alternative Predictors Based on Large-Panel Factor Models (2006)
Working Paper: Comparing alternative predictors based on large-panel factor models (2006)
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