One for the econometricians and forecasters amongst my audience. Call me a nerd, but I was quite excited to come across this new IMF working paper, The Use of Encompassing Tests for Forecast Combinations, by Turgut Kisinbay:
The paper proposes an algorithm that uses forecast encompassing tests for combining forecasts. The algorithm excludes a forecast from the combination if it is encompassed by another forecast. To assess the usefulness of this approach, an extensive empirical analysis is undertaken using a U.S. macroecoomic data set. The results are encouraging as the algorithm forecasts outperform benchmark model forecasts, in a mean square error (MSE) sense, in a majority of cases.