ECB paper identifies benefits of forecast aggregation


A European Central Bank paper, published on Monday, shows that forecasts that aggregate component series can significantly improve performance accuracy.

Colin Bermingham and Antonello D'Agostino, the paper's authors, use a factor-augmented auto-regressive model to analyse two price datasets, one for the United States and one for the euro area, to determine whether it is better to forecast a series directly or instead construct forecasts of its components and then add these component forecasts –

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