The use of dummy variables to compute predictions, prediction errors, and confidence intervals

Research output: Contribution to journalArticle

Abstract

This paper presents a method for computing predictions, prediction error variances, and confidence intervals, which can be implemented with any regression program. It demonstrates that a regression estimated for an augmented data set, obtained by (1) combining n sample points with r forecast points, and (2) including r dummy variables (each equalling one only for the corresponding forecast point), will yield r dummy variable coefficients and variances which equal the corresponding prediction errors and prediction error variances. Since most programs lack special routines to calculate these magnitudes, while manual computation is cumbersome, the proposed method is of considerable practical value.

Original languageEnglish (US)
Pages (from-to)393-397
Number of pages5
JournalJournal of Econometrics
Volume4
Issue number4
DOIs
StatePublished - Nov 1976

ASJC Scopus subject areas

  • Economics and Econometrics

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