Big Data Analytics in Economics: What Have We Learned So Far, and Where Should We Go from Here?

55 Pages Posted: 14 Jul 2017  

Norman R. Swanson

Rutgers University - Department of Economics

Weiqi Xiong

Rutgers, The State University of New Jersey - Department of Economics

Date Written: June 30, 2017

Abstract

Research into predictive accuracy testing remains at the forefront of the forecasting field. One
reason for this is that rankings of predictive accuracy across alternative models, which under misspecification are loss function dependent, are universally utilized to assess the usefulness of econometric models. A second reason, which corresponds to the objective of this paper, is that researchers are currently focusing considerable attention on so-called big data, and on new (and old) tools that are available for the analysis of this data. One of the objectives in this field is the assessment of whether big-data leads to improvement in forecast accuracy. In this survey paper, we discuss some of the latest (and most interesting) methods currently available for analyzing and utilizing big data when the objective is improved prediction. Our discussion includes a summary of various so-called dimension reduction, shrinkage, and machine learning methods, as well as a summary of recent tools that are useful for ranking prediction models associated with the implementation of these methods. We also provide a brief empirical illustration of big-data in action, in which we show that big data are indeed useful when predicting the term structure of interest rates.

Keywords: Convex loss function, Empirical processes, Forecast superiority, General loss function, Big data, Shrinkage, Latent Factors

JEL Classification: C12, C22, C53

Suggested Citation

Swanson, Norman R. and Xiong, Weiqi, Big Data Analytics in Economics: What Have We Learned So Far, and Where Should We Go from Here? (June 30, 2017). Available at SSRN: https://ssrn.com/abstract=2998299

Norman Rasmus Swanson (Contact Author)

Rutgers University - Department of Economics ( email )

NJ
United States

HOME PAGE: http://econweb.rutgers.edu/nswanson/

Weiqi Xiong

Rutgers, The State University of New Jersey - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

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