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

Peter Hansen and Allan Timmermann

No ECO2012/24, Economics Working Papers from European University Institute

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 simplifies 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: http://cadmus.eui.eu/bitstream/handle/1814/24275/ECO_2012_24.pdf (search for similar items in EconPapers)
Date: 2012
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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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