Evaluating probability forecasts for GDP declines using alternative methodologies

Lahiri, Kajal; Wang, J. George

doi:10.1016/j.ijforecast.2012.07.004

Cited by 61 publications

(68 citation statements)

References 48 publications

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“…Then we forecast K periods ahead (K from 1 to 8), considering levels of cutoff probabilities that range from 0.005 to 1 and that vary in each step by 0.005. If the forecast value of recession is less that the cutoff probability that we are considering 12 Lahiri & Wang (2013) stress that often-conventional goodness-of-fit statistics in probabilistic models, such as Pseudo R 2 , among others fail to identify the type of I and type of II errors in predicting the event of interest. Lahiri and Wang examine the quality of probability forecasts in terms of calibration, resolution and alternative variance decompositions.…”

Section: Forecasting Methodologymentioning

confidence: 99%

Financial and real sector Leading indicators of Recessions in Brazil using Probabilistic Models

Oliveira

2016

Revista Brasileira De Economia

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We examine the usefulness of various financial and real sector variables to forecast recessions in Brazil between one and eight quarters ahead. We estimate probabilistic models of recession and select models based on their outof-sample forecasts, using the Receiver Operating Characteristic (ROC) function. We find that the predictive out-of-sample ability of several models vary depending on the numbers of quarters ahead to forecast and on the number of regressors used in the model specification. The models selected seem to be relevant to give early warnings of recessions in Brazil. Analisamos a capacidade de diversas variáveis do setor financeiro e do setor real da economia para prever recessões no Brasil entre um e oito trimestres à frente. Estimamos modelos probabilísticos de recessão e os selecionamos com base em suas previsões fora da amostra, utilizando a função

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Section: Forecasting Methodologymentioning

confidence: 99%

Financial and real sector Leading indicators of Recessions in Brazil using Probabilistic Models

Oliveira

2016

Revista Brasileira De Economia

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“…The reader is referred to Croushore (1993) for a general introduction to SPF. Lahiri and Wang (2013) used a battery of diagnostic tools including the ROC curve to examine the value of these forecasts over other horizons.…”

Section: Application To Spf Probability Forecastsmentioning

confidence: 99%

“…Berge and Jordà (2011), utilizing ROC curve, investigated certain issues with the business cycle indicators defined by the National Bureau of Economic Research (NBER) in terms of their skill in classifying economic activity into recessions and expansions. Lahiri and Wang (2013) noted that one important but overlooked point in forecasting relatively uncommon events is the role of a threshold or cut-off, and usual forecasting skill measures combine the true accuracy with the implicit threshold. Drehmann and Juselius (2012) used ROC analysis to assess the performance of early warn-ing indicators for emerging financial vulnerabilities in the banking sectors.…”

Section: Introductionmentioning

confidence: 99%

Confidence Bands for ROC Curves With Serially Dependent Data

Lahiri

Liu

2018

Journal of Business & Economic Statistics

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We propose serial correlation robust asymptotic confidence bands for the receiver operating characteristic (ROC) curves estimated by quasi-maximum likelihood in the binormal model. Our simulation experiments confirm that this new method performs fairly well in finite samples. The conventional procedure is found to be markedly undersized in terms of yielding empirical coverage probabilities lower than the nominal level, especially when the serial correlation is strong. We evaluate the three-quarter-ahead probability forecasts for real GDP declines from the Survey of Professional Forecasters, and find that one would draw a misleading conclusion about forecasting skill if serial correlation is ignored. JEL Classifications: C01, C12, C13, C53Key words: Receiver operating characteristic curve, Classification, Binormal model, Quasi-maximum likelihood, Survey of Professional Forecasters, Serial correlation. * Corresponding author. Tel.: +1 518 442 4758. E-mail address: klahiri@albany.edu. † We thank Zhongwen Liang for carefully reading an earlier version of the paper and making valuable comments and suggestions.

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“…During this period, the fraction of real GDP declines is about 12.9%, meaning that it is a relatively uncommon event. Lahiri and Wang (2013) carried out a comprehensive evaluation on the accuracy of these subjective forecasts.…”

Section: An Empirical Illustrationmentioning

confidence: 99%

Asymptotic variance of Brier (skill) score in the presence of serial correlation

Lahiri¹,

Liu²

2016

Economics Letters

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We propose autocorrelation-robust asymptotic variances of the Brier score and Brier skill score, which are generally applicable in circumstances with weak serial correlation. An empirical application in macroeconomics underscores the importance of taking care of serial correlation. We find that the conventional variances are too conservative to account for the sampling variability in estimating the Brier (skill) score. Terms of use: Documents in EconStor mayJEL-Code: C010, C120, C250, C520, C530.

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Evaluating probability forecasts for GDP declines using alternative methodologies

Cited by 61 publications

References 48 publications

Financial and real sector Leading indicators of Recessions in Brazil using Probabilistic Models

Financial and real sector Leading indicators of Recessions in Brazil using Probabilistic Models

Confidence Bands for ROC Curves With Serially Dependent Data

Asymptotic variance of Brier (skill) score in the presence of serial correlation

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