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 simplifies 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.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2012/24.
Date of creation: 2012
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Other versions of this item:
- Peter Reinhard Hansen & Allan Timmermann, 2012. "Equivalence Between Out-of-Sample Forecast Comparisons and Wald Statistics," CREATES Research Papers 2012-45, School of Economics and Management, University of Aarhus.
- 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
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