On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates

Francis Diebold, Minchul Shin and Boyuan Zhang ()

No 21-06, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We propose methods for constructing regularized mixtures of density forecasts. We explore a variety of objectives and regularization penalties, and we use them in a substantive exploration of Eurozone inflation and real interest rate density forecasts. All individual inflation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move density forecasts’ probability mass from the centers to the tails, correcting for overconfidence.

Keywords: Density forecasts; forecast combinations; survey forecasts; shrinkage; model selection; regularization; partially egalitarian LASSO; model averaging; subset averaging (search for similar items in EconPapers)
JEL-codes: C2 C5 C8 (search for similar items in EconPapers)
Pages: 36
Date: 2021-02-12
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: On the aggregation of probability assessments: Regularized mixtures of predictive densities for Eurozone inflation and real interest rates (2023)
Working Paper: On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates (2022)
Working Paper: On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates (2022)
Working Paper: On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone In?ation and Real Interest Rates (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:89897

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DOI: 10.21799/frbp.wp.2021.06

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