A Simple, Non-Parametric Test Of Predictive Performance
AbstractThis paper derives a distribution free procedure for testing the accuracy of forecasts when the focus of the analysis is on the correct prediction of the direction of change in the variable under consideration. The test applies to a general m x n contingency table and it is shown that the standard null hypothesis of independence in a contingency table implies the null hypothesis of the proposed test of predictive failure but not vice versa. As a test of predictive performance the chi-squared test of independence will, in general, be more conservative than the suggested test of predictive failure. The paper also contains two applications: A dichotomous version of the test is applied to the CBI's Industrial Trends Surveys of actual and expected price changes in the manufacturing sector, and a trichotomous version of the test is applied to the demand data from business surveys of French manufacturing industry conducted by INSEE.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9021.
Length: 9 pages
Date of creation: 1990
Date of revision:
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Web page: http://www.econ.cam.ac.uk/index.htm
tests ; forecasting methods;
Other versions of this item:
- Pesaran, M Hashem & Timmermann, Allan, 1992. "A Simple Nonparametric Test of Predictive Performance," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 561-65, October.
- Pesaran, M.H. & Timmermann, A., 1990. "A Simple Non-Parametric Test Of Predictive Performance," Papers 29, California Los Angeles - Applied Econometrics.
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