Seminar

On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates

Speaker

Francis Diebold (UPenn)

Date & Time

8 March 2022

Type

Seminar

Venue

Online Seminar

Abstract: We propose methods for constructing regularized mixtures of density forecasts.
We explore a variety of objectives and regularization penalties, and we use them in a substan-
tive exploration of Eurozone inflation and real interest rate density forecasts. All individual
inflation forecasters (even the ex post best forecaster) are outperformed by our regularized
mixtures. From the Great Recession onward, the optimal regularization tends to move den-
sity forecasts’ probability mass from the centers to the tails, correcting for overconfidence.

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