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Asymptotic Inference About Predictive Ability

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  • West, K.D.

Abstract

This paper develops procedures for inference about the moments of smooth functions of out-of-sample predictions and prediction errors when there is a long time series of predictions and realizations. The aim is to provide tools for analysis of predictive accuracy and efficiency and, more generally, of predictive ability. The paper allows for nonnested and nonlinear models as well as for possible dependence of predictions and prediction errors on estimated regression parameters. Simulations indicate that the procedures can work well in samples of size typically available. Copyright 1996 by The Econometric Society.
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  • West, K.D., 1994. "Asymptotic Inference About Predictive Ability," Working papers 9417, Wisconsin Madison - Social Systems.
    • Handle: RePEc:att:wimass:9417
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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Blanchard, Olivier J. & Melino, Angelo, 1986. "The cyclical behavior of prices and quantities: The case of the automobile market," Journal of Monetary Economics, Elsevier, vol. 17(3), pages 379-407, May.
    3. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    4. Eichenbaum, Martin, 1989. "Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment," American Economic Review, American Economic Association, vol. 79(4), pages 853-864, September.
    5. Hansen, Lars Peter, 1985. "A method for calculating bounds on the asymptotic covariance matrices of generalized method of moments estimators," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 203-238.
    6. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-286, April.
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    Keywords

    econometrics ; estimator;

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