Chi-squared tests of interval and density forecasts and the Bank of England's fan charts
This paper reviews recently proposed likelihood ratio tests of goodness-of-fit and independence of interval forecasts. It recasts them in the framework of Pearson chi-squared statistics, and considers their extension to density forecasts and their exact small-sample distributions. The use of the familiar framework of contingency tables will increase the accessibility of these methods. The tests are applied to two series of density forecasts of inflation, namely the US Survey of Professional Forecasters and the Bank of England fan charts. This first evaluation of the fan chart forecasts finds that whereas the current-quarter forecasts are well-calibrated, this is less true of the one-year-ahead forecasts. The fan charts fan out too quickly, and the excessive concern with the upside risks was not justified over the period considered JEL Classification: C53, E37
|Date of creation:||Nov 2001|
|Date of revision:|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
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.:
- West, K.D., 1994.
"Asymptotic Inference About Predictive Ability,"
9417, Wisconsin Madison - Social Systems.
- repec:sae:niesru:v:167:y::i:1:p:106-112 is not listed on IDEAS
- Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-83, November.
- Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, 1997.
"Evaluating Density Forecasts,"
Center for Financial Institutions Working Papers
97-37, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, 1997. "Evaluating density forecasts," Working Papers 97-6, Federal Reserve Bank of Philadelphia.
- Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, . "Evaluating Density Forecasts," CARESS Working Papres 97-18, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, 1997. "Evaluating Density Forecasts," NBER Technical Working Papers 0215, National Bureau of Economic Research, Inc.
- Anthony Tay & Kenneth F. Wallis, 2000. "Density Forecasting: A Survey," Econometric Society World Congress 2000 Contributed Papers 0370, Econometric Society.
- Christoffersen, Peter F, 1998. "Evaluating Interval Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 841-62, November.
- Granger, C. W. J. & White, Halbert & Kamstra, Mark, 1989. "Interval forecasting : An analysis based upon ARCH-quantile estimators," Journal of Econometrics, Elsevier, vol. 40(1), pages 87-96, January.
- Lahiri, Kajal & Teigland, Christie, 1987. "On the normality of probability distributions of inflation and GNP forecasts," International Journal of Forecasting, Elsevier, vol. 3(2), pages 269-279.
- Michael P. Clements & Nick Taylor, 2003. "Evaluating interval forecasts of high-frequency financial data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 445-456.
- Anderson, Gordon, 1994. "Simple tests of distributional form," Journal of Econometrics, Elsevier, vol. 62(2), pages 265-276, June.
- Thompson, Patrick A & Miller, Robert B, 1986. "Sampling the Future: A Bayesian Approach to Forecasting from Univariate Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(4), pages 427-36, October.
- Francis X. Diebold & Anthony S. Tay & Kenneth F. Wallis, 1997.
"Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters,"
NBER Working Papers
6228, National Bureau of Economic Research, Inc.
- Francis X. Diebold & Anthony S. Tay & Kenneth F. Wallis, 1998. "Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters," Working Papers 98-15, New York University, Leonard N. Stern School of Business, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20010083. 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: (Official Publications)
If references are entirely missing, you can add them using this form.