Kentucky property insurance surtax revenue: a comparison of alternative forecasting models

Kentucky property insurance surtax revenue: a comparison of alternative forecasting models

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Article ID: iaor20041931
Country: United States
Volume: 15
Issue: 3
Start Page Number: 339
End Page Number: 353
Publication Date: Jan 2003
Journal: Journal of Public Budgeting, Accounting and Financial Management
Authors: ,
Keywords: management, time series & forecasting methods
Abstract:

Given the absence of a formal forecasting model of property insurance surtax revenue for the state of Kentucky, this paper presents the in-sample and out-of-sample forecasts of four models: Holt linear trend algorithm, autoregressive model, linear trend/autoregressive model, and economic activity model based on annual fiscal year data from 1984 to 2001. The Holt linear trend algorithm and the linear trend/autoregressive model were reasonably close in their respective forecasting performance for both the in-sample and out-of-sample forecast horizons. However, the linear trend/autoregressive model exhibited some evidence of instability for the period 1992 to 1994. With respect to the out-of-sample forecasts, the Holt linear trend algorithm provided a better fit to the actual surtax data. Moreover, as time passes and additional data on the surtax become available, the models presented can easily be updated and re-evaluated.

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