Comparing the accuracy of density forecasts from competing models
AbstractA rapidly growing literature emphasizes the importance of evaluating the forecast accuracy of empirical models on the basis of density (as opposed to point) forecasting performance. We propose a test statistic for the null hypothesis that two competing models have equal density forecast accuracy. Monte Carlo simulations suggest that the test, which has a known limiting distribution, displays satisfactory size and power properties. The use of the test is illustrated with an application to exchange rate forecasting. Copyright © 2004 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.
Volume (Year): 23 (2004)
Issue (Month): 8 ()
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966
Other versions of this item:
- Sarno, Lucio & Valente, Giorgio, 2002. "Comparing the Accuracy of Density Forecasts from Competing Models," Computing in Economics and Finance 2002 223, Society for Computational Economics.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- F31 - International Economics - - International Finance - - - Foreign Exchange
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