Unpredictability in Economic Analyis, Econometric Modelling and Forecasting

David Hendry

No 551, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Unpredictability arises from intrinsic stochastic variation, unexpected instances of outliers, and unanticipated extrinsic shifts of distributions. We analyze their properties, relationships, and different effects on the three arenas in the title, which suggests considering three associated information sets. We note the implications of unanticipated shifts for forecasting, economic analyses of efficient markets, inter-temporal derivations, and general-to-specific model selection, tackling outliers and non-constancy by impulse-indicator saturation, and contrast the potential success in modeling breaks with the major difficulties confronting forecasting.

Keywords: Unpredictability; 'Black Swans'; Distributional shifts; forecasting; Model selection (search for similar items in EconPapers)
JEL-codes: C22 C51 (search for similar items in EconPapers)
Date: 2011-05-01
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Unpredictability in economic analysis, econometric modeling and forecasting (2014)
Working Paper: Unpredictability in Economic Analysis, Econometric Modeling and Forecasting (2013)
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