Further Results on Forecasting and Model Selection under Asymmetric Loss

Peter Christoffersen and Francis Diebold

Journal of Applied Econometrics, 1996, vol. 11, issue 5, 561-71

Abstract: We make three related contributions. First, we propose a new technique for solving prediction problems under asymmetric loss using piecewise-linear approximations to the loss function, and we establish existence and uniqueness of the optimal predictor. Second, we provide a detailed application to optimal prediction of a conditionally heteroscedastic process under asymmetric loss, the insights gained from which are broadly applicable. Finally, we incorporate our results into a general framework for recursive prediction-based model selection under the relevant loss function. Copyright 1996 by John Wiley & Sons, Ltd.

Date: 1996
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