Volume 23 Issue 1 (January-March 2007)

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Increase in mean square forecast error when omitting a needed covariate

Ledolter, J.
Pages 147-152
Abstract

Mean square errors of ex-post and ex-ante forecasts from transfer function (regression) models are compared with mean square forecast errors of univariate time series models that ignore the covariate. We show that forecasts from the univariate ARMA models are never better, and are usually worse, than the forecasts from the transfer function model.

Keywords: ARMA model , Ex-ante forecast , Ex-post forecast , Transfer function model
FULL TEXT LINK
http://dx.doi.org/10.1016/j.ijforecast.2006.10.001
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