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

Abstract

Given the absence of a formal forecasting model of property insurance surtax revenue for the state of Kentucky, this paper presents the insample 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-ofsample 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 becomes available, the models presented can easily be updated and reevaluated.

Citation

Payne, J.E. and Schwendeman, K. (2003), "Kentucky property insurance surtax revenue: a comparison of alternative forecasting models", Journal of Public Budgeting, Accounting & Financial Management, Vol. 15 No. 3, pp. 339-353. https://doi.org/10.1108/JPBAFM-15-03-2003-B002