Multi-Step Estimation for Forecasting

Michael Clements and David Hendry

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We delineate conditions which favour multi-step, or dynamic estimation for multi-step forecasting. An analytical example shows how dynamic estimation (DE) may accomodateincorrectly-specified models as the forecast lead alters, improving forecast performance for some mis-specifications. However, in correctly-specified models, reducing finite-sample biases does not justify DR. In a Monte Carlo forecasting study for integrated processes, estimating a unit root in the presence of a neglected negative moving-average error may favour DR, though other solutions exist to that scenario. A second Monte Carlo study obtains the estimator biases and explains these using asymptotic approximations.

Pages: 32 pages
Date: 1996
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Citations: View citations in EconPapers (84)

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https://warwick.ac.uk/fac/soc/economics/research/w ... 95-1998/twerp447.pdf

Related works:
Journal Article: Multi-step Estimation for Forecasting (1996)
Working Paper: MULTI-STEP ESTIMATION FOR FORECASTING (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:447

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