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This Time It Is Different! Or Not? Discounting Past Data When Predicting The Future

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  • PHILIP HANS FRANSES

    (Econometric Institute, Erasmus School of Economics, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands)

  • EVA JANSSENS

    (Econometric Institute, Erasmus School of Economics, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands)

Abstract

We employ a simple method based on logistic weighted least squares to diagnose which past data are less or more useful for predicting the future course of a variable. A simulation experiment shows its merits. An illustration for monthly industrial production series for 17 countries suggests that earlier data are useful for the prediction in a crisis period (2006–2011) and for the period after the crisis (2011–2016). Hence, this time, apparently it was not that different after all.

Suggested Citation

  • Philip Hans Franses & Eva Janssens, 2018. "This Time It Is Different! Or Not? Discounting Past Data When Predicting The Future," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-34, June.
    • Handle: RePEc:wsi:afexxx:v:13:y:2018:i:02:n:s2010495218500057
    DOI: 10.1142/S2010495218500057
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    References listed on IDEAS

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