June 1, 1974
This paper considers forecasts based upon reduced forms estimated directly, and, reduced forms derived from structural equations estimated by k-class methods. Using the method of small-o asymptotics, the asymptotic expected mean squared error of any linear combination of forecasts is derived in both cases. Except in special cases, we show that neither of the two methods of estimation dominates in the sense of having a lower expected mean squared error, regardless of which k-class method is used. This result confirms earlier findings of the same nature based upon a large sample asymptotic efficiency criterion.
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