Testing for Equal Predictability of Stationary ARMA Processes

Edoardo Otrano and Umberto Triacca ()

Journal of Applied Statistics, 2007, vol. 34, issue 9, pages 1091-1108

Abstract: In this work we use a measure of predictability of a time series following a stationary ARMA process to develop a test of equal predictability of two or more time series. The test is derived by a set of propositions which links the structure of the AR and MA coefficients to the predictability measure. A particular case of this general approach is constituted by time series having a Wold decomposition with weights having the same sign; in this framework the equal predictability is equivalent to parallelism among ARMA models and the null hypothesis of equal predictability is simply a set of linear restrictions. The ARMA representation of the GARCH models presents non-negative weights, so that this test can be extended to verify the equal predictability of squared time series following GARCH structures.

Keywords: Forecasts; parallelism; Wold decomposition; GARCH models (search for similar items in EconPapers)
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