Compute the pseudo out-of-sample forecast errors

Reference no: EM131444634

Question: a. Construct pseudo out-of-sample forecasts using the AR(1) model beginning in1989:4 and going through the end of the sample (That is,

b. Construct pseudo out-of-sample forecasts using the ADL(1,4) model.

c. Construct pseudo out-of-sample using the following "native" model:

1391_pseudo 1.png

d. Compute the pseudo out-of-sample forecast errors for each model. Are any of the forecasts biased? Which model has the smallest root mean squared forecast error (RMSFE)? How large is the RMSFE (expressed in percentage points at an annual rate) for the best model?

Reference no: EM131444634

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