Modelling Methodology And Forecast Failure  

Oleh:

Clements, Michael P. ; Hendry, David F.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Econometrics Journal vol. 5 no. 2 (2002), page 319-344.
Topik: Model selection; General-to-specific; Forecast failure.
Fulltext: 319.pdf (190.1KB)

Isi artikel

We analyse by simulation the impact of model-selection strategies (sometimes called pre-testing) on forecast performance in both constant- and non-constant-parameter processes. Restricted, unrestricted and selected models are compared when either of the first two might generate the data. We find little evidence that strategies such as general-to-specific induce significant over-fitting, or thereby cause forecast-failure rejection rates to greatly exceed nominal sizes. Parameter non-constancies put a premium on correct specification, but in general, model-selection effects appear to be relatively small, and progressive research is able to detect the mis-specifications.

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