Neuroscience

Biology

Variable (mathematics)

Selection (genetic algorithm)

Economics

Set (abstract data type)

Computer science

Shrinkage

Mathematics

Data set

Econometrics

Mathematical analysis

Artificial intelligence

Mathematical economics

Programming language

Model selection

Illusion

Machine learning

Econometrica

We compare sparse and dense representations of predictive models in macroeconomics, microeconomics, and finance. To deal with a large number of possible predictors, we specify a prior that allows for both variable selection and shrinkage. The posterior distribution does not typically concentrate on a single sparse model, but on a wide set of models that often include many predictors.

Economic Predictions With Big Data: The Illusion of Sparsity