On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates

We propose methods for constructing regularized mixtures of density forecasts. We explore a variety of objectives and regularization penalties, and we use them in a substan-tive exploration of Eurozone in?ation and real interest rate density forecasts. All individual in?ation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move den-sity forecasts’ probability mass from the centers to the tails, correcting for overcon?dence.