A modified Diebold–Mariano test for equal forecast accuracy with clustered dependence

Jin Zhou, Haiqi Li and Wanling Zhong

Economics Letters, 2021, vol. 207, issue C

Abstract: This study proposes a modified Diebold–Mariano (DM) test for equal forecast accuracy with clustered dependence. A novel consistent long-run variance estimator is developed to account for the clustered dependence. The modified DM test statistic asymptotically follows a normal distribution. The moving block bootstrap is employed to improve the size and power performance of the newly proposed test. A Monte Carlo simulation shows that the modified DM test has a better finite sample performance than the conventional DM test.

Keywords: Clustered dependence; Diebold–Mariano test; Moving block bootstrap (search for similar items in EconPapers)
JEL-codes: C12 C22 F31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521003062

DOI: 10.1016/j.econlet.2021.110029

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