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Forecast Combination With Entry and Exit of Experts

Author

Listed:
  • Carlos Capistrán
  • Allan Timmermann

    (School of Economics and Management, University of Aarhus, Denmark and CREATES)

Abstract

Combination of forecasts from survey data is complicated by the frequent entry and exit of individual forecasters which renders conventional least squares regression approaches infeasible. We explore the consequences of this issue for existing combination methods and propose new methods for bias-adjusting the equal-weighted forecast or applying combinations on an extended panel constructed by back-filling missing observations using an EM algorithm. Through simulations and an application to a range of macroeconomic variables we show that the entry and exit of forecasters can have a large effect on the real-time performance of conventional combination methods. The bias-adjusted combination method is found to work well in practice.

Suggested Citation

  • Carlos Capistrán & Allan Timmermann, 2008. "Forecast Combination With Entry and Exit of Experts," CREATES Research Papers 2008-55, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2008-55
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    References listed on IDEAS

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    More about this item

    Keywords

    Real-time Data; Survey of Professional Forecasters; Bias-adjustment; EM Algorithm.;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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