Tests of Conditional Predictive Ability

Raffaella Giacomini () and Halbert White

Econometrics from University Library of Munich, Germany

Abstract: We argue that the current framework for predictive ability testing (e.g., West, 1996) is not necessarily useful for real-time forecast selection, i.e., for assessing which of two competing forecasting methods will perform better in the future. We propose an alternative framework for out-of-sample comparison of predictive ability which delivers more practically relevant conclusions. Our approach is based on inference about conditional expectations of forecasts and forecast errors rather than the unconditional expectations that are the focus of the existing literature. Compared to previous approaches, our tests are valid under more general data assumptions (heterogeneity rather than stationarity) and estimation methods, and they can handle comparison of both nested and non-nested models, which is not currently possible.

Keywords: Forecast Evaluation; Asymptotic Inference; Parameter-reduction Methods (search for similar items in EconPapers)
JEL-codes: C12 C22 C52 C53 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2003-08-11
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: Type of Document - pdf; pages: 40; figures: included
References: Add references at CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/em/papers/0308/0308001.pdf (application/pdf)

Related works:
Journal Article: Tests of Conditional Predictive Ability (2006)
Working Paper: Tests of conditional predictive ability (2003)
Working Paper: Tests of Conditional Predictive Ability (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0308001

Access Statistics for this paper

More papers in Econometrics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().