Central Bank of Chile paper questions efficiency of forecasts


A new research paper from the Central Bank of Chile looks into whether taking weighted averages of two competing forecasts can reduce mean-squared prediction errors or introduce certain inefficiencies

The paper's author, Pablo Pincheira, finds that the process of taking averages of forecasts may induce inefficiencies in the combination, even when the individual forecasts are efficient.

The research shows that the so-called 'optimal weighted average' traditionally presented in the literature may

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