Comparing Alternative Predictors Based on Large-Panel Factor Models

This paper compares the predictive ability of the factor models of Stock and Watson (2002) and Forni, Hallin, Lippi, and Reichlin (2005) using a large panel of US macroeconomic variables. We propose a nesting procedure of comparison that clarifies and partially overturns the results of similar exercises in the literature. Our main conclusion is that for the dataset at hand the two methods have a similar performance and produce highly collinear forecasts.

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Year of publication:	2007-11
Authors:	D'Agostino, Antonello ; Giannone, Domenico
Institutions:	C.E.P.R. Discussion Papers
Subject:	Factor Models \| Forecasting \| Large Cross-Section

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Extent:	application/pdf
Series:	CEPR Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 6564
Classification:	C31 - Cross-Sectional Models; Spatial Models ; C52 - Model Evaluation and Testing ; C53 - Forecasting and Other Model Applications
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005791574