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Improving the accuracy of outlook price forecasts

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Publication date
15/09/2010
Number of Pages
15
Language:
English
Type of Publication:
Articles & Journals
Focus Region:
Global
Focus Topic:
Market / Trade
Nutrition / Food Systems
Type of Risk:
Market-related
Type of Risk Managment Option:
Risk assessment
Commodity:
Crops
Author
Evelyn V. Colino, Scott H. Irwin, Philip Garcia
Organization
Agricultural Economics

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.