The use of encompassing tests for forecast combinations

Turgut Kisinbay

Journal of Forecasting, 2010, vol. 29, issue 8, 715-727

Abstract: This paper proposes an algorithm that uses forecast encompassing tests for combining forecasts when there are a large number of forecasts that might enter the combination. 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 US macroeconomic dataset. The results are encouraging; the algorithm forecasts outperform benchmark model forecasts, in a mean square error (MSE) sense, in a majority of cases. The paper also compares the empirical performance of different approaches to forecast combination, and provides a rule-of‐thumb cut‐off point for the thick‐modeling approach. Copyright (C) 2009 John Wiley & Sons, Ltd.

Keywords: forecast combination; forecast encompassing; thick‐modeling (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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http://hdl.handle.net/10.1002/for.1170

Related works:
Working Paper: The Use of Encompassing Tests for Forecast Combinations (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:29:y:2010:i:8:p:715-727

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