Comparing forecast accuracy in small samples

Roland Döhrn

No 833, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: The Diebold-Mariano-Test has become a common tool to compare the accuracy of macroeconomic forecasts. Since these are typically model-free forecasts, distribution free tests might be a good alternative to the Diebold-Mariano-Test. This paper suggests a permutation test. Stochastic simulations show that permutation tests outperform the Diebold-Mariano-Test. Furthermore, a test statistic based on absolute errors seems to be more sensitive to differences in forecast accuracy than a statistic based on squared errors.

Keywords: macroeconomic forecast; forecast accuracy; Diebold-Mariano test; permutation test (search for similar items in EconPapers)
JEL-codes: C14 C15 C53 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ecm, nep-for, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:833

DOI: 10.4419/86788966

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