A Note on Estimation of Optimal Weights for Density Forecast Combinations

Pauwels, Laurent L.; Vasnev, Andrey L.

doi:10.2139/ssrn.2210148

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A Note on Estimation of Optimal Weights for Density Forecast Combinations

15 Pages Posted: 2 Feb 2013 Last revised: 2 Sep 2015

See all articles by Laurent L. Pauwels

Laurent L. Pauwels

NYU Abu Dhabi; The University of Sydney; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Andrey L. Vasnev

University of Sydney

Date Written: January 31, 2013

Abstract

The problem of finding appropriate weights to combine several density forecasts is an important issue that is currently being debated in the forecast combination literature. A recent paper by Hall and Mitchell (IJF, 2007) proposes to combine density forecasts with the weights obtained from solving an optimization problem. This paper documents the properties of this optimization problem with a series of simulation experiments. When the number of forecasting periods is relatively small, the optimization problem often produces solutions that are dominated by a number of simple alternatives.

Keywords: Forecast combination, Density forecast, Optimization, Optimal weight, Discrete choice models

JEL Classification: C53, E37

Suggested Citation: Suggested Citation

Pauwels, Laurent L. and Vasnev, Andrey L., A Note on Estimation of Optimal Weights for Density Forecast Combinations (January 31, 2013). Available at SSRN: https://ssrn.com/abstract=2210148 or http://dx.doi.org/10.2139/ssrn.2210148