Template-type: ReDIF-Paper 1.0
Author-Name: David Hendry
Author-Email: david.hendry@nuffield.ox.ac.uk
Author-Homepage:http://www.nuff.ox.ac.uk/economics/people/hendry.htm 
Author-Workplace-Name:Nuffield College, Oxford University
Author-Workplace-Homepage:http://www.nuff.ox.ac.uk/nuffield.html
Author-Name: Michael P. Clements
Author-Email: m.p.clements@warwick.ac.uk
Author-Workplace-Name: Dept of Economics, University of Warwick
Title: Pooling of Forecasts
Abstract:
  We consider forecasting using a combination, when no model
  coincides with a non-constant data generation process (DGP).
  Practical experience suggests that combining forecasts adds
  value, and can even dominate the best individual device.
  We show why this can occur when forecasting models are
  differentially mis-specified, and is likely to occur when
  the DGP is subject to deterministic shifts.  Moreover,
  averaging may then dominate over estimated weights in the
  combination. Finally, it cannot be proved that only
  non-encompassed devices should be retained in the
  combination.  Empirical and Monte Carlo illustrations	confirm
  the analysis.
Classification-JEL:C32
Length:26 pages
Creation-Date: 2001-10-01
Number:2002-W9
File-URL:http://www.nuff.ox.ac.uk/economics/papers/2002/w9/DFHMPCFrcncEctJ.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0209