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The Implications for Econometric Modelling of Forecast Failure.

Abstract:

To reconcile forecast failure with building congruent empirical models, the authors analyze the sources of misprediction. This reveals that an ex ante forecast failure is purely a function of forecast-period events, not determinable from in-sample information. The primary causes are unmodeled shifts in deterministic factors, rather than model misspecification, collinearity, or a lack of parsimony. The authors examine the effects of deterministic breaks on equilibrium-correction mechanisms and...

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Publisher copy:
doi:10.1111/1467-9485.t01-1-00065

Authors


David F Hendry More by this author
Jurgen A. Doornik More by this author
Journal:
Scottish Journal of Political Economy
Volume:
44
Issue:
4
Publication date:
1997
DOI:
URN:
uuid:89767220-7e11-45f1-984a-d9d232727285
Local pid:
oai:economics.ouls.ox.ac.uk:11461
Language:
English

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