Forecast Encompassing Tests and Probability Forecasts
نویسندگان
چکیده
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 is investigated, in terms of small numbers of forecasts and model estimation sample sizes. We show the usefulness of the tests for the evaluation of recession probability forecasts from logit models with di¤erent leading indicators as explanatory variables, and for evaluating surveybased probability forecasts. JEL classi cation: C12, C15, C53.
منابع مشابه
An evaluation of the Survey of Professional Forecasters probability distributions of expected inflation and output growth
Regression-based tests of forecast probabilities of particular events of interest are constructed. The event forecast probabilities are derived from the SPF density forecasts of expected inflation and output growth. Tests of the event probabilities supplement statistically-based assessments of the forecast densities using the probability integral transform approach. The regression-based tests a...
متن کاملForecasting combination and encompassing tests
In this paper we demonstrate that forecast encompassing tests are valuable tools in getting an insight into why competing forecasts may be combined to produce a composite forecast which is superior to the individual forecasts. We also argue that results from forecast encompassing tests are potentially useful in model specification. We illustrate this using forecasts of quarterly UK consumption ...
متن کاملTests of Equal Forecast Accuracy and Encompassing for Nested Models
We examine the asymptotic and finite-sample properties of tests for equal forecast accuracy and encompassing applied to 1-step ahead forecasts from nested parametric models. We first derive the asymptotic distributions of two standard tests and one new test of encompassing. Tables of asymptotically valid critical values are provided. Monte Carlo methods are then used to evaluate the size and po...
متن کاملForecast Optimality Tests in the Presence of Instabilities
This paper proposes forecast optimality tests that can be used in unstable environments. They include tests for forecast unbiasedness, e¢ ciency, encompassing, serial uncorrelation, and, in general, regression-based tests of forecasting ability. The proposed tests are applied to evaluate the rationality of the Federal Reserve Greenbook forecasts as well as a variety of survey-based private fore...
متن کاملReality Checks and Nested Forecast Model Comparisons
This paper develops a novel and e¤ective bootstrap method for simulating asymptotic critical values for tests of equal forecast accuracy and encompassing among many nested models. The bootstrap, which combines elements of xed regressor and wild bootstrap methods, is simple to use. We rst derive the asymptotic distributions of tests of equal forecast accuracy and encompassing applied to foreca...
متن کامل