Forecasting multivariate time series under present-value-model short- and long-run co-movement restrictions


Autoria(s): Guillen, Osmani Teixeira Carvalho; Issler, João Victor; Saraiva, Diogo Vinícius Menezes; Hecq, Alain
Data(s)

20/03/2015

20/03/2015

26/02/2015

Resumo

Using a sequence of nested multivariate models that are VAR-based, we discuss different layers of restrictions imposed by present-value models (PVM hereafter) on the VAR in levels for series that are subject to present-value restrictions. Our focus is novel - we are interested in the short-run restrictions entailed by PVMs (Vahid and Engle, 1993, 1997) and their implications for forecasting. Using a well-known database, kept by Robert Shiller, we implement a forecasting competition that imposes different layers of PVM restrictions. Our exhaustive investigation of several different multivariate models reveals that better forecasts can be achieved when restrictions are applied to the unrestricted VAR. Moreover, imposing short-run restrictions produces forecast winners 70% of the time for the target variables of PVMs and 63.33% of the time when all variables in the system are considered.

Identificador

0104-8910

http://hdl.handle.net/10438/13540

Idioma(s)

en_US

Publicador

Fundação Getulio Vargas. Escola de Pós-graduação em Economia

Relação

Ensaios Econômicos;763

Palavras-Chave #Forecasting #Multivariate models #Vector autoregression (VAR) #Present-value restrictions #Common cycles #Cointegration #Interest rates #Prices and dividends #Economia
Tipo

Working Paper