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

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  • Francis X. Diebold

Abstract

The Diebold-Mariano ( ) test was intended for comparing forecasts; it has been, and remains, useful in that regard. The test was not intended for comparing models. Much of the large ensuing literature, however, uses -type tests for comparing models, in pseudo-out-of-sample environments. In that case, 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 necessarily a "good" way to provide insurance against in-sample overfitting in model comparisons proves largely false. On the other hand, pseudo-out-of-sample analysis remains useful for certain tasks, perhaps most notably for providing information about comparative predictive performance during particular historical episodes.

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  • Francis X. Diebold, 2015. "Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold-Mariano Tests," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(1), pages 1-1, January.
  • Handle: RePEc:taf:jnlbes:v:33:y:2015:i:1:p:1-1
    DOI: 10.1080/07350015.2014.983236
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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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