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Alternative Tests for Correct Specification of Conditional Predictive Densities

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  • Barbara Rossi
  • Tatevik Sekhposyan

Abstract

We propose new methods for evaluating predictive densities in an environment where the estimation error of the parameters used to construct the densities is preserved asymptotically under the null hypothesis. The tests offer a simple way to evaluate the correct specification of predictive densities. Monte Carlo simulation results indicate that our tests are well sized and have good power in detecting misspecifications. An empirical application to the Survey of Professional Forecasters and a baseline macroeconomic model shows the usefulness of our methodology.

Suggested Citation

  • Barbara Rossi & Tatevik Sekhposyan, 2015. "Alternative Tests for Correct Specification of Conditional Predictive Densities," Working Papers 758, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:758
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    More about this item

    Keywords

    predictive density; probability integral transform; Kolmogorov-Smirnov test; Cramér-von Mises test; forecast evaluation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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