Equivalence Between Out-of-Sample Forecast Comparisons and Wald Statistics

Peter Hansen and Allan Timmermann ()
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Allan Timmermann: UCSD and CREATES, Postal: Rady School of Management, 9500 Gilman Drive #0553, La Jolla, CA 92093-0553, USA

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We establish the equivalence between a commonly used out-of-sample test of equal predictive accuracy and the difference between two Wald statistics. This equivalence greatly simpli?es the computational burden of calculating recursive out-of-sample tests and evaluating their critical values. Our results shed new light on many aspects of the test and establishes certain weaknesses associated with using out-of-sample forecast comparison tests to conduct inference about nested regression models.

Keywords: Out-of-sample Forecast Evaluation; Nested Models; Testing. (search for similar items in EconPapers)
JEL-codes: C12 C53 G17 (search for similar items in EconPapers)
Pages: 9
Date: 2012-10-10
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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https://repec.econ.au.dk/repec/creates/rp/12/rp12_45.pdf (application/pdf)

Related works:
Journal Article: Equivalence Between Out‐of‐Sample Forecast Comparisons and Wald Statistics (2015)
Working Paper: Equivalence Between Out-of-Sample Forecast Comparisons and Wald Statistics (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2012-45

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