Forecasting Multivariate Time Series with the Theta Method

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In this study building on earlier work on the properties and performance of the univariate Theta method for a unit root data-generating process we: (a) derive new theoretical formulations for the application of the method on multivariate time series; (b) investigate the conditions for which the multivariate Theta method is expected to forecast better than the univariate one; (c) evaluate through simulations the bivariate form of the method; and (d) evaluate this latter model in real macroeconomic and financial time series. The study provides sufficient empirical evidence to illustrate the suitability of the method for vector forecasting; furthermore it provides the motivation for further investigation of the multivariate Theta method for higher dimensions
Original languageEnglish
Pages (from-to)220-229
JournalJournal of Forecasting
Volume34
Issue number3
DOIs
Publication statusPublished - 26 Feb 2015
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