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Handbook of Economic Forecasting - 1st Edition - ISBN: 9780444627315, 9780444627407

Handbook of Economic Forecasting, Volume 2B

1st Edition

Editors: Graham Elliott Allan Timmermann
eBook ISBN: 9780444627407
Hardcover ISBN: 9780444627315
Imprint: North Holland
Published Date: 15th July 2013
Page Count: 672
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Table of Contents


Introduction to the Series


Section III: Forecasters’ Objectives

Chapter 12. Forecasters’ Objectives and Strategies


1 Introduction

2 Model with Mixed Reputational and Contest Payoffs

3 Development of Reputational and Contest Theories

4 Equilibrium with Mixed Incentives

5 Estimation

6 Robustness and Extensions

7 Role of Anonymity

8 Summary and Outlook



Chapter 13. Forecasting Exchange Rates: an Investor Perspective


1 Introduction

2 Successful Investing Does Not Require Beating a Random Walk

3 Constructing a Currency Portfolio

4 Benchmarks for Currency Investors

5 Forecast Skill Evaluation: Tilt and Timing

6 Enhancing Forecasts with Conditioners

7 Summary


Section IV: Methodology

Chapter 14. Variable Selection in Predictive Regressions


1 Introduction

2 Criterion-Based Methods When N < T

3 Regularization Methods

4 Dimension Reduction Methods

5 Three Practical Problems

6 Conclusion



Chapter 15. Forecasting with Bayesian Vector Autoregression


1 Introduction

2 Bayesian Forecasting and Computation

3 Reduced Form VARs

4 Structural VARs

5 Co-Integration

6 Conditional Forecasts

7 Time-Varying Parameters and Stochastic Volatility

8 Model and Variable Selection

9 High-Dimensional VARs


Appendix A Markov Chain Monte Carlo Methods

Appendix B State-Space Models

Appendix C Distributions


Chapter 16. Copula Methods for Forecasting Multivariate Time Series


1 Introduction

2 Dependence Summary Statistics

3 Estimation and Inference for Copula Models

4 Model Selection and Goodness-of-Fit Testing

5 Other Issues in Applications

6 Applications of Copulas in Economics and Finance

7 Conclusions and Directions for Further Research



Chapter 17. Quantile Prediction


1 Introduction

2 Prediction

3 Evaluation

4 Specific Issues

5 Conclusion and Directions for Future Research



Chapter 18. Panel Data Forecasting


1 Introduction

2 The Best Linear Unbiased Predictor

3 Homogeneous versus Heterogeneous Panel Forecasts

4 Caveats, Related Studies, and Future Work



Chapter 19. Forecasting Binary Outcomes


1 Introduction

2 Probability Predictions

3 Evaluation of Binary Event Predictions

4 Binary Point Predictions

5 Improving Binary Predictions

6 Conclusion



Chapter 20. Advances in Forecast Evaluation


1 Introduction

2 Modeling and Forecasting Framework

3 Pairs of Models: Population-Level and Finite-Sample Inference

4 Unconditional Versus Conditional Evaluation

5 Evaluation of Multiple Forecasts

6 Evaluation of Real-Time Forecasts

7 Small-Sample Properties of Tests of Equal Predictive Ability

8 On the Choice of Sample Split

9 Why Do Out-of-Sample Forecast Evaluation?

10 Conclusion

11 Asymptotic Derivations for Out-of-Sample Inference: Examples



Chapter 21. Advances in Forecasting under Instability


1 Introduction

2 Is the Predictive Content Unstable Over Time?

3 What is the Relationship Between in-sample and Out-of-sample Forecasting Ability in the Presence of Instabilities?

4 Empirical Evidence

5 Conclusions


Appendix 1 Critical Value Tables




The highly prized ability to make financial plans with some certainty about the future comes from the core fields of economics. In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting. Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 (2006), concentrate on two major subjects. Volume 2A covers innovations in methodologies, specifically macroforecasting and forecasting financial variables. Volume 2B investigates commercial applications, with sections on forecasters' objectives and methodologies. Experts provide surveys of a large range of literature scattered across applied and theoretical statistics journals as well as econometrics and empirical economics journals. The Handbook of Economic Forecasting Volumes 2A and 2B provide a unique compilation of chapters giving a coherent overview of forecasting theory and applications in one place and with up-to-date accounts of all major conceptual issues.

Key Features

  • Focuses on innovation in economic forecasting via industry applications
  • Presents coherent summaries of subjects in economic forecasting that stretch from methodologies to applications
  • Makes details about economic forecasting accessible to scholars in fields outside economics


Graduate students and professors worldwide working in all subdisciplines of economics and finance


No. of pages:
© North Holland 2013
15th July 2013
North Holland
eBook ISBN:
Hardcover ISBN:


"Forecasting is one of the most challenging and competitive activities undertaken by economists. Volume 2 of the Handbook of Economic Forecasting and the companion Volume 1 are essential references for keeping abreast of recent improvements in forecasting methodology and its application in demanding circumstances." --John Geweke, University of Technology Sydney, Australia

"This is a highly recommended volume on forecasting that covers a wide-range of applications in economic and financial forecasting, as well as providing comprehensive and up-to-date overviews of forecasting theory by the leading scholars in the field." --Hashem Pesaran, University of Southern California

"An excellent resource for any economist interested in forecasting."  --Kenneth D. West, University of Wisconsin

"These articles have been written by the most important players in the areas, by the people who have provided important contributions to their fields.  I have no doubt about the very high quality of these chapters and the impact they will have on people doing applied work." --Valentina Corradi, University of Warwick

Ratings and Reviews

About the Editors

Graham Elliott

Co-Editor of the International Journal of Forecasting, Graham Elliott is a Fellow at the Center for Applied Macroeconomic Analysis.

Affiliations and Expertise

University of California, San Diego, USA

Allan Timmermann

Allan Timmerman has served as an associate editor on the editorial boards of forecasting, economics, and finance journals. A member of the UCSD faculty since 1994, he obtained his Ph.D. from Cambridge University.

Affiliations and Expertise

Rady School of Management, University of California, San Diego, USA