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Uncertainty and heterogeneity in factor models forecasting

Matteo Luciani and Libero Monteforte ()

No 930, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper, we exploit the heterogeneity in the forecasts obtained by estimating different factor models to measure forecast uncertainty. Our approach is simple and intuitive. It consists first in selecting all the models that outperform some benchmark model, and then in constructing an empirical distribution of the forecasts produced by them. We interpret this distribution as a measure of uncertainty. We illustrate our methodology by means of a forecasting exercise using a large database of Italian data from 1982 to 2009.

Keywords: factor models; model uncertainty; forecast combination; density forecast (search for similar items in EconPapers)
JEL-codes: C13 C32 C33 C52 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets and nep-for
Date: 2013-09
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Related works:
Working Paper: Uncertainty and Heterogeneity in factor models forecasting (2012) Downloads
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