On the aggregation of probability assessments: regularized mixtures of predictive densities for eurozone inflation and real interest rates

DOI10.1016/J.JECONOM.2022.06.008MaRDI QIDQ6090580zbMATH OpenFDO

Authors Francis X. Diebold, M. Shin, Boyuan Zhang

Publication date 17 November 2023

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

Full work available at URL https://arxiv.org/abs/2012.11649

zbMATH Keywords

density forecastsforecast combinationmodel averagingmodel selectionpartially egalitarian LASSOregularizationshrinkagesubset averagingsurvey forecasts

Mathematics Subject Classification ID

Statistics (62-XX) Game theory, economics, finance, and other social and behavioral sciences (91-XX)

Abstract: We propose methods for constructing regularized mixtures of density forecasts. We explore a variety of objectives and regularization penalties, and we use them in a substantive exploration of Eurozone inflation and real interest rate density forecasts. All individual inflation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move density forecasts' probability mass from the centers to the tails, correcting for overconfidence.

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Cited in

(5)

• Combining large numbers of density predictions with Bayesian predictive synthesis
• Probabilistic forecast aggregation with statistical depth
• Predictive density combination using Bayesian machine learning
• Combining density forecast accuracy tests: an application to agricultural, energy, and metal commodities
• Bregman model averaging for forecast combination

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