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on Forecasting |
| By: | Xin Jin; John M Maheu |
| Abstract: | This paper proposes new dynamic component models of realized covariance (RCOV) matrices based on recent work in time-varying Wishart distributions. The specifications are linked to returns for a joint multivariate model of returns and covariance dynamics that is both easy to estimate and forecast. Realized covariance matrices are constructed for 5 stocks using high-frequency intraday prices based on positive semi-definite realized kernel estimates. The models are compared based on a term-structure of density forecasts of returns for multiple forecast horizons. Relative to multivariate GARCH models that use only daily returns, the joint RCOV and return models provide significant improvements in density forecasts from forecast horizons of 1 day to 3 months ahead. Global minimum variance portfolio selection is improved for forecast horizons up to 3 weeks out. |
| Keywords: | eigenvalues, dynamic conditional correlation, predictive likelihoods, MCMC |
| JEL: | C11 C32 C53 |
| Date: | 2010–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-408&r=for |
| By: | Kunst, Robert M. (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria and Department of Economics, University of Vienna, Vienna, Austria); Franses, Philip Hans (Erasmus School of Economics, Econometrics, Erasmus University Rotterdam, Rotterdam, The Netherlands) |
| Abstract: | For many economic time-series variables that are observed regularly and frequently, for example weekly, the underlying activity is not distributed uniformly across the year. For the aim of predicting annual data, one may consider temporal aggregation into larger subannual units based on an activity time scale instead of calendar time. Such a scheme may strike a balance between annual modelling (which processes little information) and modelling at the finest available frequency (which may lead to an excessive parameter dimension), and it may also outperform modelling calendar time units (with some months or quarters containing more information than others). We suggest an algorithm that performs an approximate inversion of the inherent seasonal time deformation. We illustrate the procedure using weekly data for temporary staffing services. |
| Keywords: | Seasonality, time deformation, prediction, time series |
| JEL: | C22 C53 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:252&r=for |
| By: | Christophe Bellégo; Laurent Ferrara |
| Abstract: | Dimension reduction of large data sets has been recently the topic of interest of many research papers dealing with macroeconomic modelling. Especially dynamic factor models have been proved to be useful for GDP nowcasting or short-term forecasting. In this paper, we put forward an innovative factor-augmented probit model in order to analyze the business cycle. Factor estimation is carried either by standard statistical methods or by allowing a richer dynamic behaviour. An application is provided on euro area data in order to point out the ability of the model to detect recessions over the period 1974-2008. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2010-14&r=for |
| By: | Rémi Rhodes (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Vincent Vargas (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Jean-Christophe Domenge (Laboratoire de Physique Théorique de la Matière Condensée - Aucune) |
| Abstract: | We define a simple and tractable method for adding the Leverage effect in general volatility predictions. As an application, we compare volatility predictions with and without Leverage on the SP500 Index during the period 2002-2010. |
| Date: | 2010–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00502273_v1&r=for |
| By: | Anna Alberini (University of Maryland, Fondazione Eni Enrico Mattei and the School of Biological Sciences, Queen’s University); Christoph M. Rheinberger (WSL Institute for Snow and Avalanche Research SLF); Andrea Leiter (University of Innsbruck); Charles A. McCormick |
| Abstract: | What is the value of hazardous weather warnings? To answer this question, we focus on the avalanche bulletin for Switzerland issued by the WSL Institute for Snow and Avalanche Research (SLF). We take a survey-based, non-market valuation approach to estimating the value of hypothetical improvements in avalanche forecasting. We focus on backcountry skiers because (i) safety is arguably the most important type of benefit associated with the avalanche bulletin, (ii) they voluntarily undertake risks, and (iii) they perceive themselves and are generally perceived by others as skilled in avoiding risks. The respondents’ willingness to pay (WTP) for the improved services ranges between CHF 42 to 46, implying a mean value of statistical life (VSL) of CHF 1.75 million. We find that WTP increases with income and is higher among Swiss nationals and those who rate the current bulletin “useful.” Risk-tolerant individuals, persons who assessed their personal risk as lower than average, professional guides, and those who perceive themselves as proficient in using the existing bulletin report lower WTP figures. This suggests that the monetized value that people place on the enhanced bulletin reflects how productive these individuals are (or think they are) in using information to avoid avalanche risks. |
| Keywords: | Avalanche Risk, Mortality, Value of Hazardous Weather Forecasts, Contingent Valuation, Value of a Statistical Life |
| JEL: | D81 J17 Q26 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.85&r=for |
| By: | Kenn Ariga (Institute of Economic Research, Kyoto University); Ryosuke Okazawa (Osaka School of International Public Policy, Osaka University) |
| Abstract: | There exist many symptoms and emerging economic trends suggesting that the Japanese economy is headed in the direction where many European economies ended up in much of 1980s and 1990s. This paper makes highly speculative long-run forecast, based upon a comparison of two stylized models of the Japanese and "Euro" labor markets. We argue that Japano-Sclerosis, if there is one, should look rather di¤erent from Eurosclerosis in 1980s and 1990s. Our forecasts are the following. (1) Because of the resilience of the unique recruiting system of the school leavers, the Japanese economy is unlikely to face chronic high unemployment and joblessness, which plagued the Euro economies for decades, whereas (2) the chronic problem in the labor market is more likely to manifest itself as extremely low labor turnovers, and stagnant output growth and earnings. (3) Both circumstantial evidence and model implication suggest that the core characteristics of the Japanese labor market will remain unchanged even if the stagnation of the economy continues or even worsens in the future.. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:703&r=for |