Prediction Intervals

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mvictor96
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Joined: Tue Dec 19, 2017 9:23 am

Prediction Intervals

Postby mvictor96 » Tue Mar 20, 2018 4:53 am

Hello

I have a linear regression model. Given forecasts for my variables I have created forecasts of my y variable. On these forecasts obviously I would like a prediction interval. In eviews all I can see atm is getting a confidence interval of +/- 1/.96*se around my forecasts. How can I get a prediction interval (where the interval widens over time). I'm doing static forecasting.

Thank you

EViews Gareth
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Re: Prediction Intervals

Postby EViews Gareth » Tue Mar 20, 2018 6:13 am

By default, the forecast graph includes prediction intervals.
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mvictor96
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Re: Prediction Intervals

Postby mvictor96 » Thu Mar 22, 2018 3:25 am

At the moment when I am forecasting an equation the output graph shows a confidence interval that is labelled +/- 2 SE
and the confidence interval does not widen through time.

What am I doing incorrectly ?

startz
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Re: Prediction Intervals

Postby startz » Thu Mar 22, 2018 6:03 am

Why do you think the confidence intervals should widen with time?

mvictor96
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Re: Prediction Intervals

Postby mvictor96 » Thu Mar 22, 2018 7:26 am

This article explains it well

https://www.otexts.org/fpp/2/7

"A common feature of prediction intervals is that they increase in length as the forecast horizon increases. The further ahead we forecast, the more uncertainty is associated with the forecast, and so the prediction intervals grow wider. However, there are some (non-linear) forecasting methods that do not have this attribute."

startz
Non-normality and collinearity are NOT problems!
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Re: Prediction Intervals

Postby startz » Thu Mar 22, 2018 7:32 am

What the text says is true in some models and not in others. In particular, it is not generally true in models lacking dynamics.

mvictor96
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Joined: Tue Dec 19, 2017 9:23 am

Re: Prediction Intervals

Postby mvictor96 » Thu Mar 22, 2018 9:00 am

It is however made clear here and in other sources that for 1 step ahead you can estimate the prediction interval using the residual standard deviation but not for multi step.


"To produce a prediction interval, it is necessary to have an estimate of the standard deviation of the forecast distribution. For one-step forecasts for time series, the residual standard deviation provides a good estimate of the forecast standard deviation. But for all other situations, including multi-step forecasts for time series, a more complicated method of calculation is required. These calculations are usually done with standard forecasting software and need not trouble the forecaster (unless he or she is writing the software!)."

So my question is does eviews use this more complicated formula . (If so the confidence interval will change over time.......)

startz
Non-normality and collinearity are NOT problems!
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Joined: Wed Sep 17, 2008 2:25 pm

Re: Prediction Intervals

Postby startz » Thu Mar 22, 2018 9:03 am

Perhaps you should post the specific model you are using and exactly how you made the forecast.

mvictor96
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Joined: Tue Dec 19, 2017 9:23 am

Re: Prediction Intervals

Postby mvictor96 » Fri Mar 23, 2018 2:10 am

At the moment I want to focus on the simple multivariate ols regression using forecasts for variables to create a forecast for my dependent variable

startz
Non-normality and collinearity are NOT problems!
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Joined: Wed Sep 17, 2008 2:25 pm

Re: Prediction Intervals

Postby startz » Fri Mar 23, 2018 6:18 am

Earlier, you asked what you are doing incorrectly. Maybe you are doing something incorrectly, or maybe you are doing everything right. For someone to advise you, you pretty much need to show enough detail so that they can reproduce your steps.

mvictor96
Posts: 20
Joined: Tue Dec 19, 2017 9:23 am

Re: Prediction Intervals

Postby mvictor96 » Fri Mar 23, 2018 8:15 am

Yes , what am I doing incorrectly such that I am not getting the correct prediction intervals, only +-2 SE?

As explained already I am asking about the simple case of forecasting from an ols equation in eviews given future data for your repressors .Not sure how much more detail you want from there that's all you need to replicate my steps .

EViews Gareth
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Re: Prediction Intervals

Postby EViews Gareth » Fri Mar 23, 2018 8:22 am

Perhaps another way of tackling this would be for you to provide a definition of "prediction interval" and how it is different from the bands you are seeing.
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startz
Non-normality and collinearity are NOT problems!
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Re: Prediction Intervals

Postby startz » Fri Mar 23, 2018 3:06 pm

mvictor96 wrote:Yes , what am I doing incorrectly such that I am not getting the correct prediction intervals, only +-2 SE?

As explained already I am asking about the simple case of forecasting from an ols equation in eviews given future data for your repressors .Not sure how much more detail you want from there that's all you need to replicate my steps .


If you are forecasting from an OLS regression with homoskedastic errors with forecasts based on given future data for the regressors, then +- 2 SE gives the correct prediction intervals.

mvictor96
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Joined: Tue Dec 19, 2017 9:23 am

Re: Prediction Intervals

Postby mvictor96 » Wed Mar 28, 2018 2:53 am

Ok , thanks for clearing this up


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