Lahiri, Kajal and Liu, Fushang (2005): ARCH models for multiperiod forecast uncertaintya reality check using a panel of density forecasts. Published in: Advances in Econometrics , Vol. 20, (2005): pp. 321363.

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Abstract
We develop a theoretical framework to compare forecast uncertainty estimated from time series models to those available from survey density forecasts. The sum of the average variance of individual densities and the disagreement, which is the same as the variance of the aggregate density, is shown to approximate the predictive uncertainty from well specified time series models when the variance of the aggregate shocks is relatively small compared to that of the idiosyncratic shocks. We argue that due to grouping error problems, compositional effects of the panel, and other complications, the uncertainty measure has to be estimated from individual densities. Despite numerous reservations on the credibility of time series based measures of forecast uncertainty, we found that during normal times the uncertainty estimates based on ARCH models simulate the subjective survey measure remarkably well. However, during times of regime change and structural break, the two estimates do not overlap. We suggest ways to improve the time series measures during periods when forecast errors are apt to be large. The disagreement series is a good indicator of such periods.
Item Type:  MPRA Paper 

Original Title:  ARCH models for multiperiod forecast uncertaintya reality check using a panel of density forecasts 
Language:  English 
Keywords:  Inflation, Survey of Professional Forecasters, GARCH, Real time data. 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E31  Price Level ; Inflation ; Deflation C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C23  Panel Data Models ; Spatiotemporal Models E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E37  Forecasting and Simulation: Models and Applications 
Item ID:  21693 
Depositing User:  Kajal Lahiri 
Date Deposited:  31. Mar 2010 05:32 
Last Modified:  07. Mar 2015 07:23 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/21693 