Final published version
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Loss-based prior for the degrees of freedom of the Wishart distribution
AU - Rossini, Luca
AU - Villa, Cristiano
AU - Prevenas, Sotiris
AU - McCrea, Rachel
PY - 2024/4/5
Y1 - 2024/4/5
N2 - Motivated by the proliferation of extensive macroeconomic and health datasets necessitating accurate forecasts, a novel approach is introduced to address Vector Autoregressive (VAR) models. This approach employs the global-local shrinkage-Wishart prior. Unlike conventional VAR models, where degrees of freedom are predetermined to be equivalent to the size of the variable plus one or equal to zero, the proposed method integrates a hyperprior for the degrees of freedom to account for the uncertainty in the parameter values. Specifically, a loss-based prior is derived to leverage information regarding the data-inherent degrees of freedom. The efficacy of the proposed prior is demonstrated in a multivariate setting both for forecasting macroeconomic data, and Dengue infection data.
AB - Motivated by the proliferation of extensive macroeconomic and health datasets necessitating accurate forecasts, a novel approach is introduced to address Vector Autoregressive (VAR) models. This approach employs the global-local shrinkage-Wishart prior. Unlike conventional VAR models, where degrees of freedom are predetermined to be equivalent to the size of the variable plus one or equal to zero, the proposed method integrates a hyperprior for the degrees of freedom to account for the uncertainty in the parameter values. Specifically, a loss-based prior is derived to leverage information regarding the data-inherent degrees of freedom. The efficacy of the proposed prior is demonstrated in a multivariate setting both for forecasting macroeconomic data, and Dengue infection data.
KW - Forecasting
KW - Global-local shrinkage prior
KW - Loss-based prior
KW - Macroeconomic data
KW - Vector autoregressive models
U2 - 10.1016/j.ecosta.2024.04.001
DO - 10.1016/j.ecosta.2024.04.001
M3 - Journal article
JO - Econometrics and Statistics
JF - Econometrics and Statistics
SN - 2452-3062
ER -