Testing for unconditional predictive ability

Todd Clark and Michael McCracken

No 2010-031, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This chapter provides an overview of pseudo-out-of-sample tests of unconditional predictive ability. We begin by providing an overview of the literature, including both empirical applications and theoretical contributions. We then delineate two distinct methodologies for conducting inference: one based on the analytics in West (1996) and the other based on those in Giacomini and White (2006). These two approaches are then carefully described in the context of pairwise tests of equal forecast accuracy between two models. We consider both non-nested and nested comparisons. Monte Carlo evidence provides some guidance as to when the two forms of analytics are most appropriate, in a nested model context.

Keywords: Economic; forecasting (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Citations: View citations in EconPapers (10)

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DOI: 10.20955/wp.2010.031

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