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 Â© 2004 John Wiley & Sons, Ltd.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2002 with number 223.
Date of creation: 01 Jul 2002
Date of revision:
exchange rates; forecasting; forecast evaluation; density forecast.;
Other versions of this item:
- Giorgio Valente & Lucio Sarno, 2004. "Comparing the accuracy of density forecasts from competing models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(8), pages 541-557.
- 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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