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Bayesian shrinkage estimates and forecasts of individual and total or aggregate outcomes

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  • Zellner, Arnold

Abstract

Bayesian shrinkage à la Stein and others can improve estimation of individual parameters and forecasts of individual future outcomes. In this paper the issue of the impact of shrinkage on the estimation of sums or totals of individual parameters and of individual outcomes is analyzed. Quadratic and "balanced" loss functions will be employed. The latter are a linear combination of "goodness of fit" and "precision of estimation" loss functions. Several examples will be analyzed in detail to illustrate general principles.

Suggested Citation

  • Zellner, Arnold, 2010. "Bayesian shrinkage estimates and forecasts of individual and total or aggregate outcomes," Economic Modelling, Elsevier, vol. 27(6), pages 1392-1397, November.
    • Handle: RePEc:eee:ecmode:v:27:y:2010:i:6:p:1392-1397
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    References listed on IDEAS

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    1. Zellner, Arnold, 1985. "Bayesian Econometrics," Econometrica, Econometric Society, vol. 53(2), pages 253-269, March.
    2. Dey, Dipak K. & Ghosh, Malay & Strawderman, William E., 1999. "On estimation with balanced loss functions," Statistics & Probability Letters, Elsevier, vol. 45(2), pages 97-101, November.
    3. Arnold Zellner, 1997. "Bayesian Analysis in Econometrics and Statistics," Books, Edward Elgar Publishing, number 825.
    4. Zellner, Arnold & Tobias, Justin, 2001. "Further Results on Bayesian Method of Moments Analysis of the Multiple Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 121-140, February.
    5. Zellner, A., 1992. "Bayesian and Non-Bayesian Estimation using Balanced Loss Functions," Papers 92-20, California Irvine - School of Social Sciences.
    6. Zellner, Arnold & Chen, Bin, 2001. "Bayesian Modeling Of Economies And Data Requirements," Macroeconomic Dynamics, Cambridge University Press, vol. 5(5), pages 673-700, November.
    7. Zellner, Arnold, 1998. "The finite sample properties of simultaneous equations' estimates and estimators Bayesian and non-Bayesian approaches," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 185-212.
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    Cited by:

    1. Mishra, Anil V., 2016. "Foreign bias in Australian-domiciled mutual fund holdings," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 101-123.
    2. Anil V. Mishra, 2017. "Foreign bias in Australia's international equity holdings," Review of Financial Economics, John Wiley & Sons, vol. 33(1), pages 41-54, April.
    3. Mukherjee, Raja & Paul, Satya & Shankar, Sriram, 2018. "Equity home bias—A global perspective from the shrunk frontier," Economic Analysis and Policy, Elsevier, vol. 57(C), pages 9-21.
    4. Yuri S. Popkov & Yuri A. Dubnov & Alexey Yu. Popkov, 2016. "New Method of Randomized Forecasting Using Entropy-Robust Estimation: Application to the World Population Prediction," Mathematics, MDPI, vol. 4(1), pages 1-16, March.
    5. Mishra, Anil V., 2015. "Measures of equity home bias puzzle," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 293-312.

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