Collinearity and the use of latent root regression for combining GNP forecasts
- 1 July 1989
- journal article
- research article
- Published by Wiley in Journal of Forecasting
- Vol. 8 (3) , 231-238
- https://doi.org/10.1002/for.3980080308
Abstract
In combining economic forecasts a problem often faced is that the individual forecasts display some degree of dependence. We discuss latent root regression for combining collinear GNP forecasts. Our results indicate that latent root regression produces more efficient combining weight estimates (regression parameter estimates) than ordinary least squares estimation (OLS), although out‐of‐sample forecasting performance is comparable to OLS.Keywords
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