Understanding Models' Forecasting Performance

Barbara Rossi and Tatevik Sekhposyan

No 10-56, Working Papers from Duke University, Department of Economics

Abstract: We propose a new methodology to identify the sources of models’ forecasting performance. The methodology decomposes the models’ forecasting performance into asymptotically uncorrelated components that measure instabilities in the forecasting performance, predictive content, and over-fitting. The empirical application shows the usefulness of the new methodology for understanding the causes of the poor forecasting ability of economic models for exchange rate determination.

Keywords: Forecasting; Instabilities; Forecast Evaluation; Overfitting; Exchange Rates. (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Pages: 39
Date: 2010
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Citations: View citations in EconPapers (2)

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Journal Article: Understanding models' forecasting performance (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:10-56

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