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Assessing predictive accuracy in panel data models with long-range dependence
Publikation: Working paper/Preprint › Working paper › Forskning
Dokumenter
- rp19_04
Forlagets udgivne version, 804 KB, PDF-dokument
This paper proposes tests of the null hypothesis that model-based forecasts
are uninformative in panels, allowing for individual and interactive fixed effects
that control for cross-sectional dependence, endogenous predictors, and
both short-range and long-range dependence. We consider a Diebold-Mariano
style test based on comparison of the model-based forecast and a nested nopredictability benchmark, an encompassing style test of the same null, and a
test of pooled uninformativeness in the entire panel. A simulation study shows
that the encompassing style test is reasonably sized in finite samples, whereas
the Diebold-Mariano style test is oversized. Both tests have non-trivial local
power. The methods are applied to the predictive relation between economic
policy uncertainty and future stock market volatility in a multi-country analysis.
are uninformative in panels, allowing for individual and interactive fixed effects
that control for cross-sectional dependence, endogenous predictors, and
both short-range and long-range dependence. We consider a Diebold-Mariano
style test based on comparison of the model-based forecast and a nested nopredictability benchmark, an encompassing style test of the same null, and a
test of pooled uninformativeness in the entire panel. A simulation study shows
that the encompassing style test is reasonably sized in finite samples, whereas
the Diebold-Mariano style test is oversized. Both tests have non-trivial local
power. The methods are applied to the predictive relation between economic
policy uncertainty and future stock market volatility in a multi-country analysis.
| Originalsprog | Engelsk |
|---|---|
| Udgivelsessted | Aarhus |
| Udgiver | Institut for Økonomi, Aarhus Universitet |
| Antal sider | 59 |
| Status | Udgivet - 28 mar. 2019 |
| Serietitel | CREATES Research Paper |
|---|---|
| Nummer | 2019-04 |
- Panel data, predictability, long-range dependence, Diebold-Mariano test, encompassing test
Forskningsområder
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