Forecasting the Periodic Net Discount Rate with Genetic Programming

Wagner Neal F and Thompson Mark A
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Wagner Neal F: SolveIT Software Pty Ltd
Thompson Mark A: Texas Tech University

Journal of Business Valuation and Economic Loss Analysis, 2009, vol. 4, issue 1, 15

Abstract: This paper examines the periodic net discount rate using genetic programming (GP) techniques to build better short-term forecasts. Standard GP techniques require human judgment as to which data window to use, which may be problematic due to structural breaks and persistence (or long memory) in the net discount rate. We use a recently developed extension of GP to overcome this problem. While our results show no significant out-of-sample forecast improvement relative to the linear alternative or random walk model over the full sample, they do provide evidence as to the stochastic nature of the net discount rate considering the AR(3) model yielded lower forecasting errors in the post-1982 sample.

Keywords: periodic net discount rate; genetic programming; forecasts (search for similar items in EconPapers)
Date: 2009
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DOI: 10.2202/1932-9156.1072

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