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TOPIC:
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ON THE AGGREGATION OF PROBABILITY ASSESSMENTS: REGULARIZED MIXTURES OF PREDICTIVE DENSITIES FOR EUROZONE INFLATION AND REAL INTEREST RATES
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ABSTRACT
We propose methods for constructing regularized mixtures of density forecasts. We explore a variety of objectives and regularization penalties, and we use them in a substantive exploration of Eurozone inflation and real interest rate density forecasts. All individual inflation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move density forecasts' probability mass from the centers to the tails, correcting for overconfidence.
Keywords: Density forecasts, forecast combination, survey forecasts, shrinkage, model selection, regularization, partially egalitarian LASSO, model averaging, subset averaging
JEL Codes: C2, C5, C8
Click here to view the paper.
Click here to view the CV.
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This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 4 Mar 2022.
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PRESENTER
Francis X. Diebold
University of Pennsylvania
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RESEARCH FIELDS
Dynamic Predictive Modeling of Financial Markets
Macroeconomy
Climate Change
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DATE:
7 March 2022 (Monday)
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TIME:
9.00am - 10.30am
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