Testing for Bias in Forecasts for Independent Multinomial Outcomes

Philip Hans Franses and Richard Paap
Additional contact information
Richard Paap: Econometric Institute, Erasmus School of Economics, Burgemeester Oudlaan 50, 3062PA Rotterdam, The Netherlands

Forecasting, 2025, vol. 7, issue 1, 1-8

Abstract: This paper deals with a test on forecast bias in predicting independent multinomial outcomes where the predictions are probabilities. The new Likelihood Ratio (and Wald) test extends the familiar Mincer Zarnowitz regression to a multinomial logit model instead of a linear regression. The test is evaluated using various simulation experiments, which indicate that the size and power properties are good, even for small sample sizes, in the sense that the size is close to the used 5% level, and the power quickly reaches 1. We implement the test in an empirical setting on brand choice by individual households.

Keywords: multinomial outcomes; probability forecasts; forecast bias; multinomial logit model (search for similar items in EconPapers)
JEL-codes: A1 B4 C0 C1 C2 C3 C4 C5 C8 M0 Q2 Q3 Q4 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2571-9394/7/1/4/pdf (application/pdf)
https://www.mdpi.com/2571-9394/7/1/4/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jforec:v:7:y:2025:i:1:p:4-:d:1566045

Access Statistics for this article

Forecasting is currently edited by Ms. Joss Chen

More articles in Forecasting from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().