✦ LIBER ✦

Comparing the accuracy of density forecasts from competing models

✍ Scribed by Lucio Sarno; Giorgio Valente

Publisher: John Wiley and Sons
Year: 2004
Tongue: English
Weight: 153 KB
Volume: 23
Category: Article
ISSN: 0277-6693
DOI: 10.1002/for.930

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

A rapidly growing literature emphasizes the importance of evaluating the forecast accuracy of empirical models on the basis of density (as opposed to point) forecasting performance. We propose a test statistic for the null hypothesis that two competing models have equal density forecast accuracy. Monte Carlo simulations suggest that the test, which has a known limiting distribution, displays satisfactory size and power properties. The use of the test is illustrated with an application to exchange rate forecasting. Copyright © 2004 John Wiley & Sons, Ltd.

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