Optimal Forecasts from Markov Switching Models
Bibliographic Data
| ID | 19418759 |
|---|---|
| Authors | Tom Boot (0000-0003-1329-6173, University of Groningen), Andreas Pick (Econometric Institute, Erasmus University Rotterdam, 3000 DR Rotterdam, The Netherlands; Tinbergen Institute, 1082 MS Amsterdam, The Netherlands; De Nederlandsche Bank, 1017 ZN Amsterdam, The Netherlands ()) |
| Year | 2018 |
| Volume | 36 |
| Issue | 4 |
| Pages | 628-642 |
| Publication date | 2018-10-02 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.2016.1219264 |
| OpenAlex | W2267154709 |
| Language | EN |
| Citations received | 1 |
| References cited | 21 |
We derive forecasts for Markov switching models that are optimal in the mean square forecast error (MSFE) sense by means of weighting observations. We provide analytic expressions of the weights conditional on the Markov states and conditional on state probabilities. This allows us to study the effect of uncertainty around states on forecasts. It emerges that, even in large samples, forecasting performance increases substantially when the construction of optimal weights takes uncertainty around states into account. Performance of the optimal weights is shown through simulations and an application to U.S. GNP, where using optimal weights leads to significant reductions in MSFE.
Conditional expectation · Conditional probability · Econometrics · Forecast error · Markov chain · Markov model · Mathematical optimization · Statistics · Weighting · Computer Science · Financial Risk and Volatility Modeling · Forecasting Techniques and Applications · Mathematics · Monetary Policy and Economic Impact
Time Series Analysis
A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle
Maximum Likelihood from Incomplete Data Via the EM Algorithm
Regime Switches in Interest Rates
Out-of-Sample Forecast Tests Robust to the Choice of Window Size
Comparing Predictive Accuracy
Endogenous Trading Volume and Momentum in Stock-Return Volatility
Long Swings in Exchange Rates
Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a Markov-Switching Model of the Business Cycle
| Citations per year | 0.5 |
|---|---|
| Citation span | 2024 - 2024 (1) |
| Highly cited | No |