Equivalence between out-of-sample forecast comparisons and Wald statistics
Econometrica, 2015, Vol. 83, No. 6, pp. 2485-2505
HANSEN, Peter Reinhard, TIMMERMANN, Allan, Equivalence between out-of-sample forecast comparisons and Wald statistics, Econometrica, 2015, Vol. 83, No. 6, pp. 2485-2505 - http://hdl.handle.net/1814/38584
Retrieved from Cadmus, EUI Research Repository
We demonstrate the asymptotic equivalence between commonly used test statistics for out-of-sample forecasting performance and conventional Wald statistics. This equivalence greatly simplifies the computational burden of calculating recursive out-of-sample test statistics and their critical values. For the case with nested models, we show that the limit distribution, which has previously been expressed through stochastic integrals, has a simple representation in terms of ?2-distributed random variables and we derive its density. We also generalize the limit theory to cover local alternatives and characterize the power properties of the test.
Article first published online: 18 DEC 2015; Is version of EUI ECO; 2012/24 - http://hdl.handle.net/1814/24275
Cadmus permanent link: http://hdl.handle.net/1814/38584
Full-text via DOI: 10.3982/ECTA10581
ISSN: 1468-0262; 0012-9682
Initial version: http://hdl.handle.net/1814/24275
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