Bayesian and nonBayesian Techniques for Forecasting Monthly Cattle Prices

177 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1987.Econometric and time series forecasting models for monthly prices of slaughter steers 1100-1300 pounds are evaluated using mean squared error and turning point criteria. The economic model is a two-equation recursive system of supply and demand whose reduced form is used as the forecasting equation for the econometric model and is also the information set on which all other models are based. The econometric analysis is based on constant, stochastic and Bayesian estimation procedures. The univariate time series models are estimated using Box-Jenkins techniques. Vector autoregressions (VARs), classical and Bayesian, comprise the multivariate time series models. The specification of VARs is based on the Scharwz Bayesian information (SBIC), Akaike's information (AIC) and final prediction error (FPE) criteria.Initial estimation of all models is based on the 1975-1983 period; the models are updated monthly and six-month ahead forecasts are generated during 1984-1985.The RMSE evaluation reveals that the Bayesian VAR of order two (as selected by the AIC and FPE) model with asymmetric priors which reflect subjective decisions performs best for longer forecast horizons. Univariate ARIMA models (ARIMA(2,1,2) and ARIMA(3,1,1)) do well for short forecast horizons (one to three months ahead). The mean squared error decomposition (MSED) shows that all models become increasingly biased as the forecast horizon lengthens; the bias of the subjective BVAR being close to zero for one to three months ahead and about one-third of the bias for the ARIMA models for the other forecast horizons. All the econometric models do not perform well as evaluated by the RMSE and MSED.The turning point evaluation indicates that the univariate ARIMAs and the subjective BVAR closely follow the movements of actual prices for the one month-ahead forecast but this deteriorates appreciably as the forecasting horizon lengthens.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD