Forecasting using a large number of predictors: is Bayesian shrinkage a valid alternative to principal components?

DOI10.1016/J.JECONOM.2008.08.011zbMATH Open1429.62659OpenAlexW3121553976MaRDI QIDQ299225FDOQ299225

Authors: Christine De Mol, Domenico Giannone, Lucrezia Reichlin 

Publication date: 22 June 2016

Published in: Journal of Econometrics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.jeconom.2008.08.011

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zbMATH Keywords

large cross-sectionsprincipal componentsridge regressionLasso regressionBayesian shrinkageBayesian VAR

Mathematics Subject Classification ID

Factor analysis and principal components; correspondence analysis (62H25) Applications of statistics to economics (62P20) Ridge regression; shrinkage estimators (Lasso) (62J07) Economic time series analysis (91B84)

Cites Work

• The elements of statistical learning. Data mining, inference, and prediction
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• OPENING THE BLACK BOX: STRUCTURAL FACTOR MODELS WITH LARGE CROSS SECTIONS
• Inferential Theory for Factor Models of Large Dimensions
• Determining the Number of Factors in Approximate Factor Models
• The Generalized Dynamic Factor Model
• Forecasting economic time series using targeted predictors
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• Benchmark priors for Bayesian model averaging.
• An iterative thresholding algorithm for linear inverse problems with a sparsity constraint
• Atomic decomposition by basis pursuit
• Title not available (Why is that?)

Cited In (64)

• Forecasting and turning point predictions in a Bayesian panel VAR model
• Factor Extraction in Dynamic Factor Models: Kalman Filter Versus Principal Components
• Strong selection consistency of Bayesian vector autoregressive models based on a pseudo-likelihood approach
• Stock return predictability: a factor-augmented predictive regression system with shrinkage method
• Nowcasting with large Bayesian vector autoregressions
• Efficient estimation with many weak instruments using regularization techniques
• Post-selection inference of generalized linear models based on the lasso and the elastic net
• Forecasting crude oil prices: do technical indicators need economic constraints?
• Joint Structural Break Detection and Parameter Estimation in High-Dimensional Nonstationary VAR Models
• Hierarchical shrinkage in time-varying parameter models
• High-dimensional inference for linear model with correlated errors
• Bayesian forecasting with highly correlated predictors
• IPAD: stable interpretable forecasting with knockoffs inference
• Forecasting using targeted diffusion indexes
• Model-based approach for scenario design: stress test severity and banks' resiliency
• Forecasting financial and macroeconomic variables using data reduction methods: new empirical evidence
• Theory-coherent forecasting
• Determining the number of factors with potentially strong within-block correlations in error terms
• High-dimensional posterior consistency in Bayesian vector autoregressive models
• Tactical sales forecasting using a very large set of macroeconomic indicators
• Bayesian principal component regression with data-driven component selection
• Factor models with local factors -- determining the number of relevant factors
• Sir Clive W. J. Granger's contributions to forecasting
• Sparse restricted perceptions equilibrium
• High-Dimensional Vector Autoregressive Time Series Modeling via Tensor Decomposition
• Forecasting by factors, by variables, by both or neither?
• Factor models in high-dimensional time series: A time-domain approach
• Revisiting useful approaches to data-rich macroeconomic forecasting
• Sparse and robust normal and \(t\)-portfolios by penalized \(L_q\)-likelihood minimization
• Forecasting inflation and GDP growth using heuristic optimisation of information criteria and variable reduction methods
• Real-time factor model forecasting and the effects of instability
• Sparse Identification and Estimation of Large-Scale Vector AutoRegressive Moving Averages
• Regularized estimation in sparse high-dimensional time series models
• Dynamic variable selection with spike-and-slab process priors
• Forecasting Using Principal Components From a Large Number of Predictors
• BAYESIAN DYNAMIC VARIABLE SELECTION IN HIGH DIMENSIONS
• Random autoregressive models: a structured overview
• Forecasting economic time series using targeted predictors
• Estimation and forecasting in vector autoregressive moving average models for rich datasets
• Forecasting macroeconomic variables in a small open economy: a comparison between small- and large-scale models
• Nonconcave penalized estimation in sparse vector autoregression model
• Consistent estimation of high-dimensional factor models when the factor number is over-estimated
• Lasso Inference for High-Dimensional Time Series
• The three-pass regression filter: a new approach to forecasting using many predictors
• Sequential testing for structural stability in approximate factor models
• Asymptotics of the principal components estimator of large factor models with weakly influential factors
• Sparse and stable Markowitz portfolios
• Structural inference in sparse high-dimensional vector autoregressions
• Asymptotic analysis of the squared estimation error in misspecified factor models
• Approximate factor models with weaker loadings
• Choosing between identification schemes in noisy-news models
• Using large data sets to forecast sectoral employment
• Infinite-dimensional VARs and factor models
• Stein-rule estimation and generalized shrinkage methods for forecasting using many predictors
• Risks and risk premia in the US Treasury market
• Non-fundamentalness in structural econometric models: a review
• Fast and Flexible Bayesian Inference in Time-varying Parameter Regression Models
• Ridge Regression Under Dense Factor Augmented Models
• Estimation of Sparsity-Induced Weak Factor Models
• Inference in Sparsity-Induced Weak Factor Models
• When are Google Data Useful to Nowcast GDP? An Approach via Preselection and Shrinkage
• Tests of Equal Forecasting Accuracy for Nested Models with Estimated CCE Factors*
• Markov-Switching Three-Pass Regression Filter
• Reduced-Rank Envelope Vector Autoregressive Model

Uses Software

• PDCO

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