Linear constraints and the efficiency of combined forecasts

Robert T. Clemen

98 citations0/0 files storedJournal of Forecasting

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Forecasting Techniques and Applications Monetary Policy and Economic Impact Grey System Theory Applications

Abstract

Abstract Studies of combined forecasts have typically constrained the combining weights to sum to one and have not included a constant term in the combination. In a recent paper, Granger and Ramanathan (1984) have argued in favour of an unrestricted linear combination, including a constant term. This paper shows that for the purpose of prediction it may make sense to impose restrictions on the combining model because of potential increases in forecasting efficiency. Empirical results show that small gains in forecasting efficiency can be obtained by restricting the linear combination of GNP forecasts from four econometric models.

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References

1969The Combination of Forecasts 2000Forecasting Economic Time Series 1984Improved methods of combining forecasts 1974Experience with Forecasting Univariate Time Series and the Combination of Forecasts 1977Forecasting Economic Time Series 1983Averages of Forecasts: Some Empirical Results 1972The Prediction Performance of the FRB-MIT-PENN Model of the U.S. Economy 1986Combining Economic Forecasts

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