Optimal Prediction Under Asymmetric Loss
Prediction problems involving asymmetric loss functions arise routinely in many fields, yet the theory of optimal prediction under asymmetric loss is not well developed. We study the optimal prediction problem under general loss structures and characterize the optimal predictor. We compute it numerically in less tractable cases. A key theme is that the conditionally optimal forecast is biased under asymmetric loss and that the conditionally optimal amount of bias is time-varying in general and depends on higher-order conditional moments. Thus, for example, volatility dynamics (e.g., GARCH effects) are relevant for optimal point prediction under asymmetric loss. More generally, even for models with linear conditional-mean structure, the optimal point predictor is in general nonlinear under asymmetric loss, which provides a link with the broader nonlinear time series literature.
(This abstract was borrowed from another version of this item.)
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297|
Web page: http://www.econ.upenn.edu/
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.:
- Christoffersen, Peter F & Diebold, Francis X, 1996.
"Further Results on Forecasting and Model Selection under Asymmetric Loss,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 11(5), pages 561-71, Sept.-Oct.
- Christoffersen & Diebold, . "Further Results on Forecasting and Model Selection Under Asymmetric Loss," Home Pages _059, University of Pennsylvania.
- Hansen, B.E., 1992.
"Autoregressive Conditional Density Estimation,"
RCER Working Papers
322, University of Rochester - Center for Economic Research (RCER).
- Weiss, Andrew A, 1996. "Estimating Time Series Models Using the Relevant Cost Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 539-60, Sept.-Oct.
- Francis X. Diebold & Robert S. Mariano, 1994.
"Comparing Predictive Accuracy,"
NBER Technical Working Papers
0169, National Bureau of Economic Research, Inc.
- Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
- Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
- Christoffersen & Diebold, .
"Optimal Prediction Under Asymmetric Loss,"
167, 1996., University of Pennsylvania.
- Peter F. Christoffersen & Francis X. Diebold, . "Optimal Prediction Under Asymmetric Loss," CARESS Working Papres 97-20, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Peter F. Christoffersen & Francis X. Diebold, 1994. "Optimal Prediction Under Asymmetric Loss," NBER Technical Working Papers 0167, National Bureau of Economic Research, Inc.
- Peter F. Christoffersen & Francis X. Diebold, 1997. "Optimal prediction under asymmetric loss," Working Papers 97-11, Federal Reserve Bank of Philadelphia.
- Phillips, Peter C B, 1996. "Econometric Model Determination," Econometrica, Econometric Society, vol. 64(4), pages 763-812, July.
- Stockman, Alan C., 1987. "Economic theory and exchange rate forecasts," International Journal of Forecasting, Elsevier, vol. 3(1), pages 3-15.
When requesting a correction, please mention this item's handle: RePEc:wop:pennhp:_060. 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: (Thomas Krichel)
If references are entirely missing, you can add them using this form.