Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors

Yang, Aijun1,2; Xiang, Ju3; Shu, Lianjie4; Yang, Hongqiang1

2018-02

10.1007/s10614-017-9741-1

Computational Economics   影响因子和分区

0927-7099

1572-9974

In this paper, we propose an integrated sparse Bayesian variable selection in regressions with a large number of possibly highly correlated macroeconomic predictors. The variable selection is performed through the stochastic search variable selection technique. We assign a sparse prior distribution on the regression parameters and a correlation prior distribution for the binary vector. The performance of the proposed variable selection method is illustrated in forecasting one major macroeconomic time series of the US economy. Empirical results show that in terms of absolute forecast error and log predictive likelihood, our proposed method performs better than other three methods.

Sparse Bayesian variable selection Correlation prior Highly correlated predictors Out-of-sample forecasting

SCI ; SSCI

英语

通讯

Open Project Program of the Key Laboratory of Statistical Information Technology and Data Mining, State Statistics Bureau of China[SDL201704]

Business & Economics ; Mathematics

Economics ; Management ; Mathematics, Interdisciplinary Applications

WOS:000422651100007

SPRINGER

Web of Science

1.Nanjing Forestry Univ, Coll Econ & Management, Nanjing, Jiangsu, Peoples R China
2.State Stat Bur, Key Lab Stat Informat Technol & Data Min, Chengdu, Sichuan, Peoples R China
3.South Univ Sci & Technol China, Dept Finance, Shenzhen, Peoples R China
4.Univ Macau, Fac Business Adm, Macau, Peoples R China

Yang, Aijun,Xiang, Ju,Shu, Lianjie,et al. Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors[J]. Computational Economics,2018,51(2):323-338.

Yang, Aijun,Xiang, Ju,Shu, Lianjie,&Yang, Hongqiang.(2018).Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors.Computational Economics,51(2),323-338.

Yang, Aijun,et al."Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors".Computational Economics 51.2(2018):323-338.