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Cointegration and Long-Horizon Forecasting


Peter Christoffersen


University of Toronto - Rotman School of Management; Copenhagen Business School; University of Aarhus - CREATES

Francis X. Diebold


University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)
May 1997

IMF Working Paper No. 97/61

Abstract:     
Imposing cointegration on a forecasting system, if cointegration is present, is believed to improve long-horizon forecasts. Contrary to this belief, at long horizons nothing is lost by ignoring cointegration when the forecasts are evaluated using standard mutivariate forecast accuracy measures. In fact, simple univariate Box-Jenkins forecasts are just as accurate. Our results highlight a potentially important deficiency of standard forecast accuracy measures-they fail to value the maintenance of cointegrating relationships among variables-and we suggest alternatives tht explicitly do so.

Number of Pages in PDF File: 30

JEL Classification: C32, C53

working papers series


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Date posted: January 22, 1998  

Suggested Citation

Christoffersen, Peter and Diebold, Francis X., Cointegration and Long-Horizon Forecasting (May 1997). IMF Working Paper No. 97/61. Available at SSRN: http://ssrn.com/abstract=54985 or http://dx.doi.org/10.2139/ssrn.54985

Contact Information

Peter Christoffersen (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6 M5P 3C4
Canada
416-946-5511 (Phone)
HOME PAGE: http://www.christoffersen.com
Copenhagen Business School
Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark
University of Aarhus - CREATES
School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark
Francis X. Diebold
University of Pennsylvania - Department of Economics ( email )
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-1507 (Phone)
215-573-4217 (Fax)
HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN (Beta)


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References:  27
Citations:  14

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