Forecasting Multivariate Time Series with the Theta Method

Dimitrios Thomakos and Konstantinos Nikolopoulos (kostas@fortank.com)

Journal of Forecasting, 2015, vol. 34, issue 3, 220-229

Abstract: In this study building on earlier work on the properties and performance of the univariate Theta method for a unit root data‐generating process we: (a) derive new theoretical formulations for the application of the method on multivariate time series; (b) investigate the conditions for which the multivariate Theta method is expected to forecast better than the univariate one; (c) evaluate through simulations the bivariate form of the method; and (d) evaluate this latter model in real macroeconomic and financial time series. The study provides sufficient empirical evidence to illustrate the suitability of the method for vector forecasting; furthermore it provides the motivation for further investigation of the multivariate Theta method for higher dimensions. Copyright © 2015 John Wiley & Sons, Ltd.

Date: 2015
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Citations: View citations in EconPapers (6)

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Working Paper: Forecasting multivariate time series with the Theta Method (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:34:y:2015:i:3:p:220-229

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