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A Bayesian MIDAS Approach to Modeling First and Second Moment Dynamics

Author

Listed:
  • Davide Pettenuzzo

    (International Business School, Brandeis University)

  • Rossen Valkanov

    (University of California San Diego)

  • Allan Timmermann

    (University of California San Diego)

Abstract
We propose a new approach to predictive density modeling that allows for MI- DAS e¤ects in both the ?rst and second moments of the outcome and develop Gibbs sampling methods for Bayesian estimation in the presence of stochastic volatility dy- namics. When applied to quarterly U.S. GDP growth data, we ?nd strong evidence that models that feature MIDAS terms in the conditional volatility generate more accurate forecasts than conventional benchmarks. Finally, we ?nd that forecast combination methods such as the optimal predictive pool of Geweke and Amisano (2011) produce consistent gains in out-of-sample predictive performance.

Suggested Citation

  • Davide Pettenuzzo & Rossen Valkanov & Allan Timmermann, 2014. "A Bayesian MIDAS Approach to Modeling First and Second Moment Dynamics," Working Papers 76, Brandeis University, Department of Economics and International Business School.
    • Handle: RePEc:brd:wpaper:76
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    File URL: http://www.brandeis.edu/economics/RePEc/brd/doc/Brandeis_WP76.pdf
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    References listed on IDEAS

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    Cited by:

    1. Roberto Casarin & Claudia Foroni & Massimiliano Marcellino & Francesco Ravazzolo, 2016. "Uncertainty Through the Lenses of A Mixed-Frequency Bayesian Panel Markov Switching Model," Working Papers 585, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Ghysels, Eric, 2016. "Macroeconomics and the reality of mixed frequency data," Journal of Econometrics, Elsevier, vol. 193(2), pages 294-314.

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    More about this item

    Keywords

    MIDAS regressions; Bayesian estimation; stochastic volatility; out- of-sample forecasts; GDP growth.;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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