Model averaging based on leave-subject-out cross-validation for vector autoregressions

Jun Liao, Xianpeng Zong, Xinyu Zhang and Guohua Zou

Journal of Econometrics, 2019, vol. 209, issue 1, 35-60

Abstract: The vector autoregressive (VAR) model is a useful tool for economic evaluation and prediction. This paper develops a leave-subject-out cross-validation model averaging (LsoMA) method to average predictions from VAR models. The approximate unbiasedness of LsoMA and its asymptotic optimality in terms of obtaining the lowest possible quadratic errors are established. The rate of the LsoMA based weights converging to the optimal weights minimizing the expected quadratic errors is also derived. Simulation experiments show that our method is generally more efficient than the other frequently used model selection and averaging methods. Two empirical applications further illustrate that the proposed method is promising.

Keywords: Asymptotic optimality; Consistency; Leave-subject-out cross-validation; Model averaging; Vector autoregressions (search for similar items in EconPapers)
JEL-codes: C52 C53 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:209:y:2019:i:1:p:35-60

DOI: 10.1016/j.jeconom.2018.10.007

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