Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold-Mariano Tests

Francis Diebold

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: The Diebold-Mariano (DM) test was intended for comparing forecasts; it has been, and remains, useful in that regard. The DM test was not intended for comparing models. Unfortunately, however, much of the large subsequent literature uses DM-type tests for comparing models, in (pseudo-) out-of-sample environments. In that case, much simpler yet more compelling full-sample model comparison procedures exist; they have been, and should continue to be, widely used. The hunch that (pseudo-) out-of-sample analysis is somehow the “only," or “best," or even a “good" way to provide insurance against in-sample over fitting in model comparisons proves largely false. On the other hand, (pseudo-) out-of-sample analysis may be useful for learning about comparative historical predictive performance.

Keywords: : Forecasting; model comparison; model selection; out-of-sample tests (search for similar items in EconPapers)
JEL-codes: C01 C53 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2012-09-07
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Related works:
Journal Article: Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold-Mariano Tests (2015)
Working Paper: Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold-Mariano Tests (2012)
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