I have created a few versions of a probit model that predicts (gives me a
probability between 0 and 1) of a recession in the United States in the next
12 months. It uses some well known economic time series data I got from the
St. Lewis Fed’s website.
I got this to work with the following code:
#rebuild the object to include only the data I want in the model
predictors.TS <- cbind(NAPM.TS,
FEDFUNDS.TS,
IC4WSA.TS,
CurveSlope.TS,
CreditSpread.TS,
MCOILWTI.real.TS,
sp500Ret.TS)
recession.probModel <- glm(formula =
window(lag(recession.TS,k=12),start=c(1986,2),end=c(2010,7)) ~
window(predictors.TS,start=c(1986,2),end=c(2010,7)),
family=binomial(link="probit"))
that all works nicely and looks like I expected:
> summary(recession.probModel)
Call:
glm(formula = window(lag(recession.TS, k = 12), start = c(1986,
2), end = c(2010, 7)) ~ window(predictors.TS, start = c(1986,
2), end = c(2010, 7)), family = binomial(link = "probit"))
Deviance Residuals:
Min 1Q Median 3Q Max
-1.70829 -0.12217 -0.01181 0.00000 2.31322
Coefficients:
Estimate Std. Error z value Pr(>|z|)
(Intercept)
1.513e+01 6.122e+00 2.472 0.01345 *
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))NAPM.TS
-2.128e-01 7.017e-02 -3.032 0.00243 **
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))FEDFUNDS.TS
2.993e-01 1.140e-01 2.626 0.00864 **
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))IC4WSA.TS
-2.822e-05 9.675e-06 -2.917 0.00353 **
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))CurveSlope.TS
-4.451e-01 3.319e-01 -1.341 0.17990
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))CreditSpread.TS
-2.209e-01 1.300e+00 -0.170 0.86507
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))MCOILWTI.real.TS
9.426e-02 2.122e-02 4.442 8.9e-06 ***
window(predictors.TS, start = c(1986, 2), end = c(2010, 7))sp500Ret.TS
-8.458e-01 3.799e+00 -0.223 0.82384
---
Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
(Dispersion parameter for binomial family taken to be 1)
Null deviance: 222.512 on 293 degrees of freedom
Residual deviance: 97.135 on 286 degrees of freedom
AIC: 113.14
Number of Fisher Scoring iterations: 10
Now what I want to get it to do is use the model I just estimated to predict
a recession probability in, say, 2010-8, a period for which I do have data.
To do that I tried the following:
predict.glm(object=recession.probModel,
newdata=window(predictors.TS,start=c(2010,8),end=c(2010,8)),
type=”response”)
I expected this to output one data point but instead it spits out a vector
of 286 values, none of which is between 0 and 1. Any idea of how I can get
it to tell me what the predicted probability is for Aug 2008 given the data
I have for the independent variables? Should I not be trying to do this as a
time series? I’m at a bit of a loss here so any help pointing me in the
right direction would be appreciated.
My ultemate goal is to run a rolling estimation of the model, holding out
the most recent periods to see how well it does on out of sample prediction
and to get a forecast of the near future.
--
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