Advanced Search
MyIDEAS: Login to save this paper or follow this series

Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold-Mariano Tests

Contents:

Author Info

  • Francis X. Diebold

    ()
    (Department of Economics, University of Pennsylvania)

Abstract

The Diebold-Mariano (DM) test was intended for comparing forecasts; it has been, and remains, useful in that regard. The DM test was not intended for comparing models. Unfortunately, however, much of the large subsequent literature uses DM-type tests for comparing models, in (pseudo-) out-of-sample environments. In that case, much simpler yet more compelling full-sample model comparison procedures exist; they have been, and should continue to be, widely used. The hunch that (pseudo-) out-of-sample analysis is somehow the “only," or “best," or even a “good" way to provide insurance against in-sample over fitting in model comparisons proves largely false. On the other hand, (pseudo-) out-of-sample analysis may be useful for learning about comparative historical predictive performance.

Download Info

If 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.
File URL: http://economics.sas.upenn.edu/system/files/12-035.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-035.

as in new window
Length: 16 pages
Date of creation: 07 Sep 2012
Date of revision:
Handle: RePEc:pen:papers:12-035

Contact details of provider:
Postal: 3718 Locust Walk, Philadelphia, PA 19104
Phone: 215-898-9992
Fax: 215-573-2378
Email:
Web page: http://economics.sas.upenn.edu/pier
More information through EDIRC

Related research

Keywords: : Forecasting; model comparison; model selection; out-of-sample tests;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 307-33, March.
  2. Li, Tong, 2009. "Simulation based selection of competing structural econometric models," Journal of Econometrics, Elsevier, Elsevier, vol. 148(2), pages 114-123, February.
  3. 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.
  4. David E. Rapach & Jack K. Strauss & Guofu Zhou, 2010. "Out-of-Sample Equity Premium Prediction: Combination Forecasts and Links to the Real Economy," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 821-862, February.
  5. Kilian, Lutz & Taylor, Mark P, 2001. "Why is it so Difficult to Beat the Random Walk Forecast of Exchange Rates?," CEPR Discussion Papers 3024, C.E.P.R. Discussion Papers.
  6. Clark, Todd E. & McCracken, Michael W., 2009. "Tests of Equal Predictive Ability With Real-Time Data," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 27(4), pages 441-454.
  7. Inoue, Atsushi & Kilian, Lutz, 2006. "On the selection of forecasting models," Journal of Econometrics, Elsevier, Elsevier, vol. 130(2), pages 273-306, February.
  8. 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.
  9. Inoue, Atsushi & Kilian, Lutz, 2002. "In-sample or out-of-sample tests of predictability: which one should we use?," Working Paper Series, European Central Bank 0195, European Central Bank.
  10. Todd E. Clark & Michael W. McCracken, 2011. "Advances in forecast evaluation," Working Papers 2011-025, Federal Reserve Bank of St. Louis.
  11. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 134-44, January.
  12. Douglas Rivers & Quang Vuong, 2002. "Model selection tests for nonlinear dynamic models," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 1-39, June.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. My "Must Read" List
    by Dave Giles in Econometrics Beat: Dave Giles' Blog on 2012-09-27 01:33:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. J. Isaac Miller, 2014. "Simple Robust Tests for the Specification of High-Frequency Predictors of a Low-Frequency Series," Working Papers, Department of Economics, University of Missouri 1412, Department of Economics, University of Missouri.
  2. Rachidi Kotchoni & Dalibor Stevanovic, 2013. "Probability and Severity of Recessions," Cahiers de recherche 1341, CIRPEE.
  3. Hajo Holzmann & Matthias Eulert, 2014. "The role of the information set for forecasting - with applications to risk management," Papers 1404.7653, arXiv.org.
  4. Elliott, Graham & Gargano, Antonio & Timmermann, Allan, 2013. "Complete subset regressions," Journal of Econometrics, Elsevier, Elsevier, vol. 177(2), pages 357-373.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pen:papers:12-035. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dolly Guarini).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.