Measuring Forecast Uncertainty By Disagreement
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Measuring Forecast Uncertainty By Disagreement
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Author : Kajal Lahiri
language : en
Publisher:
Release Date : 2008
Measuring Forecast Uncertainty By Disagreement written by Kajal Lahiri and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Using a standard decomposition of forecasts errors into common and idiosyncratic shocks, we show that aggregate forecast uncertainty can be expressed as the disagreement among the forecasters plus the perceived variability of future aggregate shocks. Thus, the reliability of disagreement as a proxy for uncertainty will be determined by the stability of the forecasting environment, and the length of the forecast horizon. Using density forecasts from the Survey of Professional Forecasters, we find direct evidence in support of our hypothesis. Our results support the use of GARCH-type models, rather than the ex post squared errors in consensus forecasts, to estimate the ex ante variability of aggregate shocks as a component of aggregate uncertainty.
Disagreement As A Measure Of Uncertainty
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Author : William A. Bomberger
language : en
Publisher:
Release Date : 1998
Disagreement As A Measure Of Uncertainty written by William A. Bomberger and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
This paper presents evidence from the Livingston survey of inflation forecasts that forecaster disagreement provides a useful measure of forecast uncertainty. The evidence is analogous to the evidence for ARCH effects. Disagreement at the time of the forecast has a large positive effect on the conditional variance of the subsequent forecast error. As a conditioning variable, forecaster disagreement dominates ARCH for both survey errors and the error terms in Engle's quarterly model of inflation. As measured by the resulting conditional variances, disagreement indicates larger and more variable levels of uncertainty for the 1946-94 period.
Uncertainty And Disagreement In Economic Forecasting
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Author : Stefania D'Amico
language : en
Publisher:
Release Date : 2008
Uncertainty And Disagreement In Economic Forecasting written by Stefania D'Amico and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Forecast Uncertainty Disagreement And The Linear Pool
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Author : Malte Knüppel
language : en
Publisher:
Release Date : 2019
Forecast Uncertainty Disagreement And The Linear Pool written by Malte Knüppel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
The linear pool is the most popular method for combining density forecasts. We analyze the linear pool's implications concerning forecast uncertainty in a new theoretical framework that focuses on the mean and variance of each density forecast to be combined. Our results show that, if the variance predictions of the individual forecasts are unbiased, the well-known 'disagreement' component of the linear pool exacerbates the upward bias of the linear pool's variance prediction. Moreover, we find that disagreement has no predictive content for ex-post forecast uncertainty under conditions which can be empirically relevant. These findings suggest the removal of the disagreement component from the linear pool. The resulting centered linear pool outperforms the linear pool in simulations and in empirical applications to inflation and stock returns.
Measuring Global And Country Specific Uncertainty
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Author : Ezgi O. Ozturk
language : en
Publisher: International Monetary Fund
Release Date : 2017-10-30
Measuring Global And Country Specific Uncertainty written by Ezgi O. Ozturk and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-10-30 with Business & Economics categories.
Motivated by the literature on the capital asset pricing model, we decompose the uncertainty of a typical forecaster into common and idiosyncratic uncertainty. Using individual survey data from the Consensus Forecasts over the period of 1989-2014, we develop monthly measures of macroeconomic uncertainty covering 45 countries and construct a measure of global uncertainty as the weighted average of country-specific uncertainties. Our measure captures perceived uncertainty of market participants and derives from two components that are shown to exhibit strikingly different behavior. Common uncertainty shocks produce the large and persistent negative response in real economic activity, whereas the contributions of idiosyncratic uncertainty shocks are negligible.
Measuring Inflation Expectations
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Author : Christoph Becker
language : en
Publisher:
Release Date : 2023
Measuring Inflation Expectations written by Christoph Becker and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
In density forecasts, respondents are asked to assign probabilities to a response scale with pre-specified ranges of inflation. In two large-scale experiments, one conducted in the US and one in Germany, we show how the specifics of the response scale determine the responses: Shifting, compressing, or expanding the scale leads to shifted, compressed, and expanded forecasts. Mean forecast, uncertainty, and disagreement vary by several percentage points. The findings have implications for survey design and for central banks' optimal adjustment of the response scales during times of high inflation.
Measuring Uncertainty Of A Combined Forecast And Some Tests For Forecaster Heterogeneity
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Author : Kajal Lahiri
language : en
Publisher:
Release Date : 2015
Measuring Uncertainty Of A Combined Forecast And Some Tests For Forecaster Heterogeneity written by Kajal Lahiri and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We have argued that from the standpoint of a policy maker, the uncertainty of using the average forecast is not the variance of the average, but rather the average of the variances of the individual forecasts that incorporate idiosyncratic risks. With a slight reformulation of the loss function and a standard factor decomposition of a panel of forecasts, we show that the uncertainty of the average forecast can be expressed as the disagreement among the forecasters plus the volatility of the common shock. Using new statistics to test for the homogeneity of idiosyncratic errors under the joint limits with both T and n approaching infinity simultaneously, we show that some previously used measures significantly underestimate the conceptually correct benchmark forecast uncertainty.
The Behavior Of Uncertainty And Disagreement And Their Roles In Economic Prediction
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Author : Robert W. Rich
language : en
Publisher:
Release Date : 2017
The Behavior Of Uncertainty And Disagreement And Their Roles In Economic Prediction written by Robert W. Rich and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This paper examines point and density forecasts from the European Central Bank's Survey of Professional Forecasters. We derive individual uncertainty measures along with individual point- and density-based measures of disagreement. We also explore the relationship between uncertainty and disagreement, as well as their roles in respondents' forecast performance and forecast revisions. We observe substantial heterogeneity in respondents' uncertainty and disagreement. In addition, there is little co-movement between uncertainty and disagreement, and forecast performance shows a more robust inverse relationship with disagreement than with uncertainty. Further, forecast revisions display a more meaningful association with disagreement than with uncertainty: Those respondents displaying higher levels of disagreement revise their point and density forecasts by a larger amount.
Measuring Disagreement In Probabilistic And Density Forecasts
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Author : Ryan Cumings-Menon
language : en
Publisher:
Release Date : 2021
Measuring Disagreement In Probabilistic And Density Forecasts written by Ryan Cumings-Menon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Uncertainty Information And Disagreement Of Economic Forecasters
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Author : Mehdi Shoja
language : en
Publisher:
Release Date : 2016
Uncertainty Information And Disagreement Of Economic Forecasters written by Mehdi Shoja and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
An information framework is proposed for the systematic application, unification, and generalizations of the measures used in the uncertainty and disagreement of economic forecasters literature. The framework uses the mixture model of density forecasts and applies an uncertainty function and an information divergence to individual forecast distributions generated in a random environment and to their mixture distribution. The focal measure is the Jensen-Shannon divergence of the mixture which admits Kullback-Leibler and mutual information representations. Illustrations include exploring the dynamics of the individual and aggregate uncertainty about the US inflation rate using the Survey of Professional Forecasters (SPF). Each quarter the SPF solicits forecast distributions on a set of intervals and the survey design has been changed over time. We show that the normalized entropy index corrects the distortion caused by the changes made in the number of intervals. Bayesian hierarchical models are used to examine the association of the inflation uncertainty with the anticipated inflation and the dispersion of point forecasts. Implementation of the information framework based on variance and Dirichlet model for capturing uncertainty about the probability distribution of the economic variable are briefly discussed.