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Evaluating forecast accuracy for Error Correction constraints and Intercept Correction
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2013 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper examines the forecast accuracy of an unrestricted Vector Autoregressive (VAR) model for GDP, relative to a comparable Vector Error Correction (VEC) model that recognizes that the data is characterized by co-integration. In addition, an alternative forecast method, Intercept Correction (IC), is considered for further comparison. Recursive out-of-sample forecasts are generated for both models and forecast techniques. The generated forecasts for each model are objectively evaluated by a selection of evaluation measures and equal accuracy tests. The result shows that the VEC models consistently outperform the VAR models. Further, IC enhances the forecast accuracy when applied to the VEC model, while there is no such indication when applied to the VAR model. For certain forecast horizons there is a significant difference in forecast ability between the VEC IC model compared to the VAR model.

Place, publisher, year, edition, pages
2013. , 37 p.
Keyword [en]
Forecast Accuracy, Vector Error Correction, Vector Autoregressive, Co-integration, Intercept Correction and Diebold-Mariano test
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:uu:diva-194423OAI: oai:DiVA.org:uu-194423DiVA: diva2:605334
Subject / course
Statistics
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2013-02-14 Created: 2013-02-13 Last updated: 2013-02-14Bibliographically approved

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Evaluating forecast accuracy for Error Correction constraints and Intercept Correction.(1331 kB)1964 downloads
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf