Research output: Working paper/Preprint › Working paper › Research
Statistical tests for equal predictive ability across multiple forecasting methods. / Borup, Daniel; Thyrsgaard, Martin.
Aarhus : Institut for Økonomi, Aarhus Universitet, 2017.Research output: Working paper/Preprint › Working paper › Research
}
TY - UNPB
T1 - Statistical tests for equal predictive ability across multiple forecasting methods
AU - Borup, Daniel
AU - Thyrsgaard, Martin
PY - 2017/5/17
Y1 - 2017/5/17
N2 - We develop a multivariate generalization of the Giacomini-White tests for equal conditional predictive ability. The tests are applicable to a mixture of nested and non-nested models, incorporate estimation uncertainty explicitly, and allow for misspecification of the forecasting model as well as non-stationarity of the data. We introduce two finite-sample corrections, leading to good size and power properties. We also provide a two-step Model Confidence Set-type decision rule for ranking the forecasting methods into sets of indistinguishable conditional predictive ability, particularly suitable in dynamic forecast selection. In the empirical application we consider forecasting of the conditional variance of the S&P500 Index.
AB - We develop a multivariate generalization of the Giacomini-White tests for equal conditional predictive ability. The tests are applicable to a mixture of nested and non-nested models, incorporate estimation uncertainty explicitly, and allow for misspecification of the forecasting model as well as non-stationarity of the data. We introduce two finite-sample corrections, leading to good size and power properties. We also provide a two-step Model Confidence Set-type decision rule for ranking the forecasting methods into sets of indistinguishable conditional predictive ability, particularly suitable in dynamic forecast selection. In the empirical application we consider forecasting of the conditional variance of the S&P500 Index.
KW - forecast comparison, multivariate tests of equal predictive ability, Giacomini-White test, Diebold-Mariano test, conditional forecast combination
M3 - Working paper
T3 - CREATES Research Paper
BT - Statistical tests for equal predictive ability across multiple forecasting methods
PB - Institut for Økonomi, Aarhus Universitet
CY - Aarhus
ER -