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Statistical tests for multiple forecast comparison

Author

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  • Mariano, Roberto S.
  • Preve, Daniel

Abstract

We consider a multivariate version of the Diebold–Mariano test for equal predictive ability of three or more forecasting models. The Wald-type test, S, which has a null distribution that is asymptotically chi-squared, is shown to be generally invariant with respect to the ordering of the models being compared. Finite-sample corrections for the test are also developed. Monte Carlo simulations indicate that S has reasonable size properties in large samples but tends to be oversized in moderate samples. The finite-sample correction succeeds in correcting for size, but only partially. For the size-adjusted tests, power increases with sample size, as expected. It is speculated that further finite-sample improvements can be achieved using Hotelling’s T2 or bootstrap critical values.

Suggested Citation

  • Mariano, Roberto S. & Preve, Daniel, 2012. "Statistical tests for multiple forecast comparison," Journal of Econometrics, Elsevier, vol. 169(1), pages 123-130.
    • Handle: RePEc:eee:econom:v:169:y:2012:i:1:p:123-130
    DOI: 10.1016/j.jeconom.2012.01.014
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    More about this item

    Keywords

    Forecast comparison; Multivariate tests of equal predictive ability; Diebold–Mariano test; Finite-sample correction;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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