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Equivalence Between Out-of-Sample Forecast: Comparisons and Wald statistics
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ECO_2012_24.pdf (151.04 KB)
2012/24
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1725-6704
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EUI ECO; 2012/24
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HANSEN, Peter Reinhard, TIMMERMANN, Allan, Equivalence Between Out-of-Sample Forecast: Comparisons and Wald statistics, EUI ECO, 2012/24 - https://hdl.handle.net/1814/24275
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.