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Optimal forecast intervals under asymmetric loss

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  • Matei Demetrescu

    (Goethe-University Frankfurt, Frankfurt|Main, Germany)

Abstract

An optimality criterion for forecast intervals under asymmetric loss functions is proposed. A loss optimal forecast interval is obtained by requiring that the expected loss, conditional on a future realization within the desired interval, be minimal. The main difficulty in the context of forecasting under asymmetric loss emerges when there is no knowledge about the distribution of the innovations. For solving this problem, an extension of estimation under the relevant loss function is suggested. In many cases, one also needs to account for the additional variability due to estimation of model parameters. Another solution, based on the bootstrap, works for both problems. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Matei Demetrescu, 2007. "Optimal forecast intervals under asymmetric loss," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 26(4), pages 227-238.
    • Handle: RePEc:jof:jforec:v:26:y:2007:i:4:p:227-238
    DOI: 10.1002/for.1019
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    References listed on IDEAS

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    1. Christoffersen, Peter F. & Diebold, Francis X., 1997. "Optimal Prediction Under Asymmetric Loss," Econometric Theory, Cambridge University Press, vol. 13(6), pages 808-817, December.
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    Cited by:

    1. Matei Demetrescu & Mu-Chun Wang, 2014. "Incorporating Asymmetric Preferences into Fan Charts and Path Forecasts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 287-297, April.
    2. Alp, Tansel & Demetrescu, Matei, 2010. "Joint forecasts of Dow Jones stocks under general multivariate loss function," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2360-2371, November.
    3. Bratu, Mihaela, 2013. "The Assessment And Improvement Of The Accuracy For The Forecast Intervals," Working Papers of Macroeconomic Modelling Seminar 132602, Institute for Economic Forecasting.

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