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

Francis Diebold, Minchul Shin and Boyuan Zhang ()

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

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 substan-tive exploration of Eurozone in?ation and real interest rate density forecasts. All individual in?ation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move den-sity forecasts’ probability mass from the centers to the tails, correcting for overcon?dence.

Keywords: Density forecasts; forecast combination; 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 pages
Date: 2021-01-04
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Citations: View citations in EconPapers (3)

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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 Inflation and Real Interest Rates (2021)
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