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Predictive Density Combination Using a Tree-Based Synthesis Function

Tony Chernis, Niko Hauzenberger, Florian Huber, Gary Koop and James Mitchell

Papers from arXiv.org

Abstract: Bayesian predictive synthesis (BPS) provides a method for combining multiple predictive distributions based on agent/expert opinion analysis theory and encompasses a range of existing density forecast pooling methods. The key ingredient in BPS is a ``synthesis'' function. This is typically specified parametrically as a dynamic linear regression. In this paper, we develop a nonparametric treatment of the synthesis function using regression trees. We show the advantages of our tree-based approach in two macroeconomic forecasting applications. The first uses density forecasts for GDP growth from the euro area's Survey of Professional Forecasters. The second combines density forecasts of US inflation produced by many regression models involving different predictors. Both applications demonstrate the benefits -- in terms of improved forecast accuracy and interpretability -- of modeling the synthesis function nonparametrically.

Date: 2023-11
New Economics Papers: this item is included in nep-ecm and nep-for
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http://arxiv.org/pdf/2311.12671 Latest version (application/pdf)

Related works:
Working Paper: Predictive Density Combination Using a Tree-Based Synthesis Function (2023) Downloads
Working Paper: Predictive Density Combination Using a Tree-Based Synthesis Function (2023) Downloads
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