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Variational Bayes in State Space Models: Inferential and Predictive Accuracy

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  • David T. Frazier
  • Ruben Loaiza-Maya
  • Gael M. Martin

Abstract

Using theoretical and numerical results, we document the accuracy of commonly applied variational Bayes methods across a range of state space models. The results demonstrate that, in terms of accuracy on fixed parameters, there is a clear hierarchy in terms of the methods, with approaches that do not approximate the states yielding superior accuracy over methods that do. We also document numerically that the inferential discrepancies between the various methods often yield only small discrepancies in predictive accuracy over small out-of-sample evaluation periods. Nevertheless, in certain settings, these predictive discrepancies can become meaningful over a longer out-of-sample period. This finding indicates that the invariance of predictive results to inferential inaccuracy, which has been an oft-touted point made by practitioners seeking to justify the use of variational inference, is not ubiquitous and must be assessed on a case-by-case basis.

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  • David T. Frazier & Ruben Loaiza-Maya & Gael M. Martin, 2021. "Variational Bayes in State Space Models: Inferential and Predictive Accuracy," Papers 2106.12262, arXiv.org, revised Feb 2022.
  • Handle: RePEc:arx:papers:2106.12262
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    Cited by:

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    2. Gary Koop & Dimitris Korobilis, 2023. "Bayesian Dynamic Variable Selection In High Dimensions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1047-1074, August.
    3. Rub'en Loaiza-Maya & Didier Nibbering, 2022. "Efficient variational approximations for state space models," Papers 2210.11010, arXiv.org, revised Jun 2023.
    4. Liu, Jie & Ye, Zifeng & Chen, Kun & Zhang, Panpan, 2024. "Variational Bayesian inference for bipartite mixed-membership stochastic block model with applications to collaborative filtering," Computational Statistics & Data Analysis, Elsevier, vol. 189(C).
    5. Martin, Gael M. & Frazier, David T. & Maneesoonthorn, Worapree & Loaiza-Maya, Rubén & Huber, Florian & Koop, Gary & Maheu, John & Nibbering, Didier & Panagiotelis, Anastasios, 2024. "Bayesian forecasting in economics and finance: A modern review," International Journal of Forecasting, Elsevier, vol. 40(2), pages 811-839.
    6. Gael M. Martin & David T. Frazier & Ruben Loaiza-Maya & Florian Huber & Gary Koop & John Maheu & Didier Nibbering & Anastasios Panagiotelis, 2023. "Bayesian Forecasting in the 21st Century: A Modern Review," Monash Econometrics and Business Statistics Working Papers 1/23, Monash University, Department of Econometrics and Business Statistics.
    7. Gael M. Martin & David T. Frazier & Christian P. Robert, 2021. "Approximating Bayes in the 21st Century," Monash Econometrics and Business Statistics Working Papers 24/21, Monash University, Department of Econometrics and Business Statistics.

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