Confidence Intervals: Forecast vs. Makemodel
Posted: Tue Aug 28, 2018 7:41 am
Dear all,
I am a little bit confused and really hope you can help me. I estimated several models (time series as well as pooled regression). In case of a time series regression I can hit the forecast button and obtain the standard errors and confidence intervals of the forecast - no problem at all. But when I solve the model via "make model", which seems to be necessary in case of a pooled regression, the confidence intervals are very narrow. I compared both standard errors in a time series regression ("forecast" vs. "make model") and the standard errors of "make model" were indeed much smaller than the ones produced by the forecast button. I read the eviews guide chapter 23, but got no sufficient answer. On p. 144 is mentioned that the forecast standard errors are computed as follows: forecast se = s*sqrt(1+xt'(X'X)^(-1)*xt). I tried to calculate the standard errors on my own, but failed with the dimensions. As far as I understand, xt should be the coefficient matrix at time t (the row vector respectively), but that would not match with the dimension of the inverted coefficient matrix.
Can anyone please explain me the differences between the standard error calculation of the normal forecast and the make model prediction?
Is there another way to match both standard errors in order to calculate the confidence interval in case of a pooled regression properly?
I am very desperate and happy about every answer.
Thanks in Advance.
I am a little bit confused and really hope you can help me. I estimated several models (time series as well as pooled regression). In case of a time series regression I can hit the forecast button and obtain the standard errors and confidence intervals of the forecast - no problem at all. But when I solve the model via "make model", which seems to be necessary in case of a pooled regression, the confidence intervals are very narrow. I compared both standard errors in a time series regression ("forecast" vs. "make model") and the standard errors of "make model" were indeed much smaller than the ones produced by the forecast button. I read the eviews guide chapter 23, but got no sufficient answer. On p. 144 is mentioned that the forecast standard errors are computed as follows: forecast se = s*sqrt(1+xt'(X'X)^(-1)*xt). I tried to calculate the standard errors on my own, but failed with the dimensions. As far as I understand, xt should be the coefficient matrix at time t (the row vector respectively), but that would not match with the dimension of the inverted coefficient matrix.
Can anyone please explain me the differences between the standard error calculation of the normal forecast and the make model prediction?
Is there another way to match both standard errors in order to calculate the confidence interval in case of a pooled regression properly?
I am very desperate and happy about every answer.
Thanks in Advance.