Jore, Anne Sofie, Mitchell, James and Vahey, Shaun P. (2010) Combining forecast densities from VARs with uncertain instabilities. Journal of Applied Econometrics, Vol.25 (No.4). pp. 621-634. doi:10.1002/jae.1162 ISSN 0883-7252.

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Abstract

Recursive-weight forecast combination is often found to an ineffective method of improving point forecast accuracy in the presence of uncertain instabilities. We examine the effectiveness of this strategy for forecast densities using (many) vector autoregressive (VAR) and autoregressive (AR) models of output growth, inflation and interest rates. Our proposed recursive-weight density combination strategy, based on the recursive logarithmic score of the forecast densities, produces well-calibrated predictive densities for US real-time data by giving substantial weight to models that allow for structural breaks. In contrast, equal-weight combinations produce poorly calibrated forecast densities for Great Moderation data. Copyright © 2010 John Wiley & Sons, Ltd.

Item Type:	Journal Article
Divisions:	Faculty of Social Sciences > Warwick Business School > Global Energy Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Applied Econometrics
Publisher:	Wiley-Blackwell Publishing, Inc
ISSN:	0883-7252
Official Date:	2010
Dates:	Date Event 2010 Published
Volume:	Vol.25
Number:	No.4
Page Range:	pp. 621-634
DOI:	10.1002/jae.1162
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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