The Department of Statistics and Actuarial Science Fall Colloquium Series presents:

Yuan Liao, Tippie Children Professor in Economics, Tippie College of Business, University of Iowa

"Does Noise Hurt Economic Forecasts?"

Abstract: This paper explores whether variable selection enhances forecasting. We show three results: (1) High dimensional linear forecast models are not sparse if the outcome is driven by latent factors. (2) We also prove a compelling result that including noise in predictions yields greater benefits than excluding it by taking advantage of benign overfitting. (3) In contrast, the naive “ridgeless regression,” when the dimension is not significantly larger than the sample size, cannot reach optimal forecast.

Meet and Greet at 3:00 pm in 241 SH. Colloquium at 3:30 pm in 61 SH.