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Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors
Aijun Yang1,2; Ju Xiang3; Lianjie Shu4; Hongqiang Yang1
2018-02
Source PublicationCOMPUTATIONAL ECONOMICS
ISSN0927-7099
Volume51Issue:2Pages:323-338
Abstract

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.

KeywordSparse Bayesian Variable Selection Correlation Prior Highly Correlated Predictors Out-of-sample Forecasting
DOI10.1007/s10614-017-9741-1
URLView the original
Indexed BySCI ; SSCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics ; Mathematics
WOS SubjectEconomics ; Management ; Mathematics, Interdisciplinary Applications
WOS IDWOS:000422651100007
PublisherSPRINGER
The Source to ArticleWOS
Fulltext Access
Citation statistics
Cited Times [WOS]:1   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionDEPARTMENT OF ACCOUNTING AND INFORMATION MANAGEMENT
Corresponding AuthorJu Xiang
Affiliation1.College of Economics and Management, Nanjing Forestry University, Nanjing, China
2.Key Laboratory of Statistical Information Technology and Data Mining, State Statistics Bureau, Chengdu, China
3.Department of Finance, South University of Science and Technology of China, Shenzhen, China
4.Faculty of Business Administration, University of Macau, Macau, China
Recommended Citation
GB/T 7714
Aijun Yang,Ju Xiang,Lianjie Shu,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.
APA Aijun Yang,Ju Xiang,Lianjie Shu,&Hongqiang Yang.(2018).Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors.COMPUTATIONAL ECONOMICS,51(2),323-338.
MLA Aijun Yang,et al."Sparse Bayesian Variable Selection with Correlation Prior for Forecasting Macroeconomic Variable using Highly Correlated Predictors".COMPUTATIONAL ECONOMICS 51.2(2018):323-338.
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