Bayesian forecasting in economics and finance : a modern review

Martin, Gael M. and Frazier, David T. and Maneesoonthorn, Worapree and Loaiza-Maya, Rubén and Huber, Florian and Koop, Gary and Maheu, John and Nibbering, Didier and Panagiotelis, Anastasios (2024) Bayesian forecasting in economics and finance : a modern review. International Journal of Forecasting, 40 (2). pp. 811-839. ISSN 0169-2070 (https://doi.org/10.1016/j.ijforecast.2023.05.002)

[thumbnail of Martin-etal-IJF-2023-Bayesian-forecasting-in-economics-and-finance] Text. Filename: Martin_etal_IJF_2023_Bayesian_forecasting_in_economics_and_finance.pdf
Accepted Author Manuscript
Restricted to Repository staff only until 18 January 2025.
License: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 logo
Download (900kB) | Request a copy

Abstract

The Bayesian statistical paradigm provides a principled and coherent approach to probabilistic forecasting. Uncertainty about all unknowns that characterize any forecasting problem – model, parameters, latent states – is able to be quantified explicitly and factored into the forecast distribution via the process of integration or averaging. Allied with the elegance of the method, Bayesian forecasting is now underpinned by the burgeoning field of Bayesian computation, which enables Bayesian forecasts to be produced for virtually any problem, no matter how large or complex. The current state of play in Bayesian forecasting in economics and finance is the subject of this review. The aim is to provide the reader with an overview of modern approaches to the field, set in some historical context, with sufficient computational detail given to assist the reader with implementation.

ORCID iDs

Martin, Gael M., Frazier, David T., Maneesoonthorn, Worapree, Loaiza-Maya, Rubén, Huber, Florian, Koop, Gary ORCID logoORCID: https://orcid.org/0000-0002-6091-378X, Maheu, John, Nibbering, Didier and Panagiotelis, Anastasios;
CORE (COnnecting REpositories)