Forecast evaluation of small nested model sets
Kirstin Hubrich () and
Kenneth West ()
Journal of Applied Econometrics, 2010, vol. 25, issue 4, 574-594
Abstract:
We propose two new procedures for comparing the mean squared prediction error (MSPE) of a benchmark model to the MSPEs of a small set of alternative models that nest the benchmark. Our procedures compare the benchmark to all the alternative models simultaneously rather than sequentially, and do not require re-estimation of models as part of a bootstrap procedure. Both procedures adjust MSPE differences in accordance with Clark and West (2007); one procedure then examines the maximum t-statistic, while the other computes a chi-squared statistic. Our simulations examine the proposed procedures and two existing procedures that do not adjust the MSPE differences: a chi-squared statistic and White's (2000) reality check. In these simulations, the two statistics that adjust MSPE differences have the most accurate size, and the procedure that looks at the maximum t-statistic has the best power. We illustrate our procedures by comparing forecasts of different models for US inflation. Copyright © 2010 John Wiley & Sons, Ltd.
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)
Downloads: (external link)
http://hdl.handle.net/10.1002/jae.1176 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2010-v25.4/ Supporting data files and programs (text/html)
Related works:
Working Paper: Forecast evaluation of small nested model sets (2009) 
Working Paper: Forecast Evaluation of Small Nested Model Sets (2008) 
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:jae:japmet:v:25:y:2010:i:4:p:574-594
Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252
DOI: 10.1002/jae.1176
Access Statistics for this article
Journal of Applied Econometrics is currently edited by M. Hashem Pesaran
More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().