Monday, September 4, 2017

Why no empirical work?

Another of @unlearningecon's suggestions was to showcase more of my "(successful) empirical work".

This was a conscious decision. I don't believe in self-publishing technical results without some direct mechanism for peer review. The journal submission process is one such avenue, but so are blogs with comments. Books don't have the same direct nexus with criticism (good/bad reviews on Amazon can function a bit like this, but are not quite the same thing as actual blogs). In fact, this mechanism is precisely why I wanted to have a book blog: so I could show and respond to both positive and negative criticism.

Given that reservation to putting non-peer-reviewed material in the book, it quickly became obvious that I should write a non-technical book aimed at a general audience. I scaled back the math, and that precluded inclusion of my empirical work.

However, if you are interested in exploring further, the empirical work is collected on my blog:

... especially at the aggregated forecast link where I track the performance of the forecasts I make (and comparisons to other models). There are results like this:

The green shaded region is the Information Equilibrium (IE) model forecast for the 10-year US treasury bond interest rate. The red line is a forecast from the "Blue Chip Economic Indicators" report from the end of 2014 (made up of a survey of expert). The purple dashed line is the CBO forecast from the end of 2016. The vertical lines indicate when the forecast was made.

The gray jagged line is the daily US interest rate data (from FRED) since the end of 2014. As you can see, the IE model was a much better forecast than the BCEI experts. I've been tracking this forecast for almost three years. Even the sudden rise in rates after the US presidential election hasn't thrown this forecast off (the bands are 90% confidence intervals for monthly data).

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