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Forecasting by factors, by variables, or both?

Abstract:

We consider forecasting with factors, variables and both, modeling in-sample using Autometrics so all principal components and variables can be included jointly, while tackling multiple breaks by impulse-indicator saturation. A forecast-error taxonomy for factor models highlights the impacts of location shifts on forecast-error biases. Forecasting US GDP over 1-, 4- and 8-step horizons using the dataset from Stock and Watson (2009) updated to 2011:2 shows factor models are more useful for n...

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Volume:
600
Series:
Discussion paper series
Publication date:
2012-01-01
URN:
uuid:1e028165-c5c9-4eaf-b22c-360304e8d9f1
Local pid:
oai:economics.ouls.ox.ac.uk:15386
Language:
English

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