SAFE Research Seminar "High-dimensional forecasting with known knowns and known unknowns", M. Hashem Pesaran (University of Southern California and Trinity College, Cambridge)


12 Nov 2024 14:15 PM
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12 Nov 2024 15:30 PM

The SAFE Visitors Program jointly with the Macro Seminar organize and cordially invite you to attend a seminar on 

High-dimensional forecasting with known knowns and known unknowns
 
M. Hashem Pesaran (University of Southern California and Trinity College, Cambridge)

14:15 - 15:30, HoF E.01

Abstract:
Forecasts play a central role in decision making under uncertainty. After a brief review of the general issues, this paper considers ways of using high-dimensional data in forecasting. We consider selecting variables from a known active set, known knowns, using Lasso and OCMT, and approximating unobserved latent factors, known unknowns, by various means. This combines both sparse and dense approaches. We demonstrate the various issues involved in variable selection in a high-dimensional setting with an application to forecasting UK inflation at different horizons over the period 2020q1-2023q1. This application shows both the power of parsimonious models and the importance of allowing for global variables.