The Impact of Scale Heterogeneity on Income Trajectory Predictions

Table of Links

Abstract and 1. Introduction

2. The Compound Decision Paradigm
3. Parametric Priors
4. Nonparametric Prior Estimation
5. Empirical Bayes Methods for Discrete Data
6. Empirical Bayes Methods for Panel Data
7. Conclusion

Appendix A. Tweedie’s Formula

Appendix B. Predictive Distribution Comparison

References

Appendix B. Predictive Distribution Comparison

In Figures 10 and 11 we compare predictive distributions for the scale homogeneous ARMA(1,1) model and the scale heterogeneous AR(1) model. It can be noted that the width of the ARMA(1,1) prediction bands are the same for both highly variable and very stable individuals in the pre-forecast period, while the AR(1) model that incorporates individual specific scale effects adapts to this difference.