By Clements M.P., Hendry D.F.

ISBN-10: 0631215697

ISBN-13: 9780631215691

A spouse to financial Forecasting offers an obtainable and accomplished account of modern advancements in fiscal forecasting. all the chapters has been in particular written through knowledgeable within the box, bringing jointly in one quantity various contrasting methods and perspectives. Forecasting is a pragmatic enterprise, such a lot of of the chapters are aimed toward practitioners and nonspecialists.This e-book surveys a box that has elevated swiftly in recent times. There aren't any different updated remedies that survey forecasting in one quantity. at the present, the reader has little alternative yet to find magazine articles and books which regularly extol the virtues of 1 technique between many, or clarify only one of the various difficulties that beset financial forecasting. The spouse offers a finished account of the best methods and modeling thoughts which are typically hired. an intensive editorial review locations the contributions in context, and indicates their interconnections and commonalities.

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4) has easily derivable properties. In fact, its distribution is normal: eT + h −1 ⎛ ⎡ ⎛ T ⎞ ⎤⎞ 2⎢ 2 2 ⎜ ~ N 0, σ 1 + zT +h ⎜ ∑zt ⎟ ⎥ ⎟ ⎢ ⎜ ⎝ t=1 ⎠ ⎥ ⎟⎠ ⎝ ⎦ ⎣ h = 1, . . 5) as follows immediately from normality and independence of {ut}, and hence the normality and independence of uT+h and y. Further results depend on the nature of zt. 5) simplifies: eT+h ~ N(0, σ 2[1 + (1/T)] ) h = 1, . . , H. 3) is unbiased for the outcome yT+h , the variance of eT+h is also the MSFE. 5 as a function of the forecast horizon h, where the units are in terms of σ 2.

This model can be rewritten in matrix form: ⎡yt ⎤ ⎡b* 0⎤ ⎡yt−1 ⎤ ⎡u*t ⎤ ⎢ ⎥=⎢ ⎥⎢ ⎥ + ⎢ ⎥ ⎣ zt ⎦ ⎣ c 0⎦ ⎣ zt−1 ⎦ ⎣ vt ⎦ ⎛ ⎡0⎤ ⎡σ 2 + b 2ω 2 ⎡u*t ⎤ ⎢ ⎥ ~ NI ⎜ ⎢0⎥ , ⎢ bω 2 ⎝⎣ ⎦ ⎣ ⎣ vt ⎦ bω 2 ⎤⎞ . 34) PREDICTABLE UNCERTAINTY 37 ⎡y ⎤ xt = ⎢ t ⎥ , ⎣ zt ⎦ ⎡b* 0⎤ B = ⎢ ⎥, ⎣ c 0⎦ ⎡u* ⎤ wt = ⎢ t ⎥ , and ⎣ vt ⎦ 2 2 ⎡ 2 Ω = ⎢σ + b2 ω ⎣ bω bω 2 ⎤ . 34); see Clements and Hendry (1998). 34) provides a remarkably general framework for forecasting, hence its designation as a separate model – model M5. The elements in the feedback matrix B may take a wide range of values, and the covariance matrix Ω need be only symmetric, positive semidefinite.

26) has the following interpretation. The equation for pt is derived from a demand equation: the price pt clears the market for a given quantity qt supplied. The value 1/b is the price elasticity of demand. The equation for qt is a supply equation, capturing (for instance) how much farmers decide to produce this year (qt ), depending upon the price that they were able to obtain in the previous year ( pt−1). The value c is the price elasticity of supply. See Tinbergen (1931) and Suits (1955) for pivotal contributions on the cobweb model, and Henderson and Quandt (1971, pp.

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A Companion to Economic Forecasting by Clements M.P., Hendry D.F.


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