Home > Working Papers

Working Paper 2008-028A

Search | View by Year | View by Category | View by Author

"Improving Forecast Accuracy by Combining Recursive and Rolling Forecasts"
by Todd E. Clark, and Michael W. McCracken

This paper presents analytical, Monte Carlo, and empirical evidence on combining recursive and rolling forecasts when linear predictive models are subject to structural change. Using a characterization of the bias-variance tradeoff faced when choosing between either the recursive and rolling schemes or a scalar convex combination of the two, we derive optimal observation windows and combining weights designed to minimize mean square forecast error. Monte Carlo experiments and several empirical examples indicate that combination can often provide improvements in forecast accuracy relative to forecasts made using the recursive scheme or the rolling scheme with a fixed window width.

Full Text - Acrobat PDF (421k)

Notify Me of Updates for:
Category > Applied Econometrics
Author > Michael W. McCracken