Equivalence Between Out-of-Sample Forecast Comparisons and Wald Statistics
AbstractWe establish the equivalence between a commonly used out-of-sample test of equal predictive accuracy and the difference between two Wald statistics. This equivalence greatly simpli?es the computational burden of calculating recursive out-of-sample tests and evaluating their critical values. Our results shed new light on many aspects of the test and establishes certain weaknesses associated with using out-of-sample forecast comparison tests to conduct inference about nested regression models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2012-45.
Date of creation: 10 Oct 2012
Date of revision:
Contact details of provider:
Web page: http://www.econ.au.dk/afn/
Out-of-sample Forecast Evaluation; Nested Models; Testing.;
Other versions of this item:
- Peter Reinhard Hansen & Allan Timmermann, 2012. "Equivalence Between Out-of-Sample Forecast Comparisons and Wald Statistics," Economics Working Papers ECO2012/24, European University Institute.
- 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
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-24 (All new papers)
- NEP-ECM-2012-11-24 (Econometrics)
- NEP-ETS-2012-11-24 (Econometric Time Series)
- NEP-FOR-2012-11-24 (Forecasting)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Todd E. Clark & Michael W. McCracken, 1999.
"Tests of equal forecast accuracy and encompassing for nested models,"
Research Working Paper
99-11, Federal Reserve Bank of Kansas City.
- Clark, Todd E. & McCracken, Michael W., 2001. "Tests of equal forecast accuracy and encompassing for nested models," Journal of Econometrics, Elsevier, vol. 105(1), pages 85-110, November.
- Todd E. Clark & Michael W. McCracken, 2000. "Tests of Equal Forecast Accuracy and Encompassing for Nested Models," Econometric Society World Congress 2000 Contributed Papers 0319, Econometric Society.
- Todd E. Clark & Michael McCracken, 1999. "Tests of Equal Forecast Accuracy and Encompassing for Nested Models," Computing in Economics and Finance 1999 1241, Society for Computational Economics.
- Inoue, Atsushi & Rossi, Barbara, 2011.
"Out-of-Sample Forecast Tests Robust to the Choice of Window Size,"
CEPR Discussion Papers
8542, C.E.P.R. Discussion Papers.
- Barbara Rossi & Atsushi Inoue, 2012. "Out-of-Sample Forecast Tests Robust to the Choice of Window Size," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(3), pages 432-453, April.
- Barbara Rossi & Atsushi Inoue, 2012. "Out-of-sample forecast tests robust to the choice of window size," Economics Working Papers 1404, Department of Economics and Business, Universitat Pompeu Fabra.
- Barbara Rossi & Atsushi Inoue, 2011. "Out-of-sample forecast tests robust to the choice of window size," Working Papers 11-31, Federal Reserve Bank of Philadelphia.
- McCracken, Michael W., 2007. "Asymptotics for out of sample tests of Granger causality," Journal of Econometrics, Elsevier, vol. 140(2), pages 719-752, October.
- Raffaella Giacomini & Halbert White, 2003.
"Tests of conditional predictive ability,"
Boston College Working Papers in Economics
572, Boston College Department of Economics.
- Raffaella Giacomini & Halbert White, 2003. "Tests of Conditional Predictive Ability," Econometrics 0308001, EconWPA.
- Giacomini, Raffaella & White, Halbert, 2003. "Tests of Conditional Predictive Ability," University of California at San Diego, Economics Working Paper Series qt5jk0j5jh, Department of Economics, UC San Diego.
- Hansen, Bruce E., 1992. "Convergence to Stochastic Integrals for Dependent Heterogeneous Processes," Econometric Theory, Cambridge University Press, vol. 8(04), pages 489-500, December.
- Todd Clark & Michael McCracken, 2005. "Evaluating Direct Multistep Forecasts," Econometric Reviews, Taylor & Francis Journals, vol. 24(4), pages 369-404.
- Peter Reinhard Hansen & Allan Timmermann, 2012.
"Choice of Sample Split in Out-of-Sample Forecast Evaluation,"
CREATES Research Papers
2012-43, School of Economics and Management, University of Aarhus.
- Peter Reinhard HANSEN & Allan TIMMERMANN, 2012. "Choice of Sample Split in Out-of-Sample Forecast Evaluation," Economics Working Papers ECO2012/10, European University Institute.
- repec:att:wimass:9417 is not listed on IDEAS
- Kenneth D. West, 1994.
"Asymptotic Inference About Predictive Ability,"
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.