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R² bounds for predictive models : what univariate properties tell us about multivariate predictability
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Mitchell, James, Robertson, Donald and Wright, Stephen (2019) R² bounds for predictive models : what univariate properties tell us about multivariate predictability. Journal of Business and Economic Statistics, 37 (4). pp. 681-695. doi:10.1080/07350015.2017.1415909 ISSN 0735-0015.
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WRAP-R2-bounds-predictive-models-univariate-predicability-Mitchell-2017.pdf - Accepted Version - Requires a PDF viewer. Download (3259Kb) | Preview |
Official URL: https://doi.org/10.1080/07350015.2017.1415909
Abstract
A longstanding puzzle in macroeconomic forecasting has been that a wide variety of multivariate models have struggled to out-predict univariate models consistently. We seek an explanation for this puzzle in terms of population properties. We derive bounds for the predictive R2 of the true, but unknown, multivariate model from univariate ARMA parameters alone. These bounds can be quite tight, implying little forecasting gain even if we knew the true multivariate model. We illustrate using CPI inflation data.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||||
Library of Congress Subject Headings (LCSH): | Macroeconomics -- Mathematical models , Multivariate analysis | ||||||||||
Journal or Publication Title: | Journal of Business and Economic Statistics | ||||||||||
Publisher: | Americal Statistical Association | ||||||||||
ISSN: | 0735-0015 | ||||||||||
Official Date: | 2019 | ||||||||||
Dates: |
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Volume: | 37 | ||||||||||
Number: | 4 | ||||||||||
Page Range: | pp. 681-695 | ||||||||||
DOI: | 10.1080/07350015.2017.1415909 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 28 November 2017 | ||||||||||
Date of first compliant Open Access: | 22 December 2018 |
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