Combination of Forecast Methods Using Encompassing Tests: An Algorithm-Based Procedure ; For the revised version of this paper, see Working Paper 240, Economics Series, June 2009, which includes some changes. The most important change regards the reference of Kisinbay (2007), which was not reported in the previous version. The hierarchical procedure proposed in the paper is based on the approach of Kisinbay (2007), but some modifications of that approach are provided.

Costantini, Mauro and Pappalardo, Carmine (October 2008) Combination of Forecast Methods Using Encompassing Tests: An Algorithm-Based Procedure ; For the revised version of this paper, see Working Paper 240, Economics Series, June 2009, which includes some changes. The most important change regards the reference of Kisinbay (2007), which was not reported in the previous version. The hierarchical procedure proposed in the paper is based on the approach of Kisinbay (2007), but some modifications of that approach are provided. IHS Economics Series 228

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Abstract or Table of Contents

Abstract: This paper proposes a strategy to increase the efficiency of forecast combining methods. Given the availability of a wide range of forecasting models for the same variable of interest, our goal is to apply combining methods to a restrictedset of models. To this aim, an algorithm procedure based on a widely used encompassing test (Harvey, Leybourne, Newbold, 1998) is developed. First, forecasting models are ranked according to a measure of predictive accuracy (RMSFE) and, in a consecutive step, each prediction is chosen for combining only if it is not encompassed by the competing models. To assess the robustness of this procedure, an empirical application to Italian monthly industrial production using ISAE short-term forecasting models is provided .;

Item Type: IHS Series
Keywords: 'Combining forecasts' 'Econometric models' 'Evaluating forecasts' 'Models selection' 'Time series'
Classification Codes (e.g. JEL): C32, C53
Status: Published
Date Deposited: 26 Sep 2014 10:38
Last Modified: 22 Jul 2017 18:22
URI: http://irihs.ihs.ac.at/id/eprint/1868

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