Economics Department

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TITLE:
Hypernormal Densities

AUTHOR(S):
Raffaella Giacomini, Boston College
Andreas Gottschling, Deutsche Bank
Christian Haefke, Universitat Pompeu Fabre
Halbert White, University of California, San Diego

DOCUMENT TYPE: Article

ABSTRACT:
We derive a new family of probability densities that have the property of closed-form integrability. This flexible family finds a variety of applications, of which we illustrate density forecasting from models of the AR-ARCH class for U.S. inflation. We find that the hypernormal distribution for the model's disturbances leads to better density forecasts than the ones produced under the assumption that the disturbances are Normal or Student's t.