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Improving the accuracy of outlook price forecasts
Article first published online: 5 NOV 2010
© 2010 International Association of Agricultural Economists
Volume 42, Issue 3, pages 357–371, May 2011
How to Cite
Colino, E. V., Irwin, S. H. and Garcia, P. (2011), Improving the accuracy of outlook price forecasts. Agricultural Economics, 42: 357–371. doi: 10.1111/j.1574-0862.2010.00519.x
- Issue published online: 4 APR 2011
- Article first published online: 5 NOV 2010
- Received 9 July 2009; received in revised form 2 August 2010; accepted 9 September 2010
- Hog prices;
- Time-series models;
- Composite forecasts
This study investigates the predictive ability of outlook hog price forecasts released by Iowa State University relative to alternative time-series and market forecasts. Under root mean squared error (RMSE), the futures market forecast is most accurate at the first and second horizon but less accurate than Iowa outlook and the other forecast methods at the third horizon. In terms of the individual time-series models, some vector autoregressions (VARs) and Bayesian VARs flexible in specification and estimation and model averaging tend to perform better than Iowa outlook forecasts. Evidence from encompassing tests, more stringent tests of forecast performance, indicates that many price forecasts can add incremental information to the Iowa forecast. Simple combinations of these models and outlook forecasts are able to reduce forecast errors by economically significant levels. Overall, the results indicate that it is possible to provide more accurate forecasts than Iowa outlook at every horizon.