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Forecast Encompassing Tests and Probability Forecasts

Michael Clements and David Harvey

No 269744, Economic Research Papers from University of Warwick - Department of Economics

Abstract: We consider tests of forecast encompassing for probability forecasts, for both quadratic and logarithmic scoring rules. We propose test statistics for the null of forecast encompassing, present the limiting distributions of the test statistics, and investigate the impact of estimating the forecasting models’ parameters on these distributions. The small-sample performance of the various statistics is investigated, both in terms of small numbers of forecasts and model estimation sample sizes. Two empirical applications show the usefulness of the tests for the evaluation of recession probability forecasts from logit models with different leading indicators as explanatory variables, and for evaluating survey-based probability forecasts.

Keywords: Agricultural and Food Policy; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Date: 2006-07-21
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Related works:
Journal Article: Forecast encompassing tests and probability forecasts (2010) Downloads
Working Paper: Forecast Encompassing Tests and Probability Forecasts (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269744

DOI: 10.22004/ag.econ.269744

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