Improving forecasting performance by window and model averaging

Prasad Bhattacharya and Dimitrios Thomakos

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This study presents extensive results on the benefits of rolling window and model averaging. Building on the recent work on rolling window averaging by Pesaran et al (2010, 2009) and on exchange rate forecasting by Molodtsova and Papell (2009), we explore whether rolling window averaging can be considered beneficial on a priori grounds. We investigate whether rolling window averaging can improve the performance of model averaging, especially when 'simpler' models are used. The analysis provides strong support for rolling window averaging, outperforming the best window forecasts more than 50% of the time across all rolling windows. Furthermore, rolling window averaging smoothes out the forecast path, improves robustness, and minimizes the pitfalls associated with potential structural breaks.

JEL-codes: C22 C53 E31 F31 F47 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... ya_thomakos_2011.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2011-05

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().