Recession Model Update (October 2019)
Friends,
Current Predictions
Within 6 months: 33.7%
Within 12 months: 51.2%
Within 24 months: 69.0%
Meanwhile, financial market turbulence remains at historically low levels. Despite the high predicted recession probabilities, I'm not too worried until turbulence spikes up in a meaningful way.
The predicted output looks a bit different than last time...
Astute readers might realize that the 12-month probability is noticeably higher than last month.
This is due to a change suggested by a reader, who made me realize that my prior methodology adjusted for class imbalance during cross-validation (hyperparameter tuning), but failed to account for class imbalance during model fitting.
This revision mostly impacted the 12-month probability, while the other two predicted probabilities remained near prior levels.
Until Next Time
Terrence | terrencez.com
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