This papers offers a theoretical explanation for the stylized fact that forecast combinations with estimated optimal weights often perform poorly in applications. The properties of the forecast combination are typically derived under the assumption that the weights are fixed, while in practice...

This paper provides the first thorough investigation of the negative weights that can emerge when combining forecasts. The usual practice in the literature is to ignore or trim negative weights, i.e., set them to zero. This default strategy has its merits, but it is not optimal. We study the...