Article

Multiple Forecast Model Evaluation

Valentina Corradi and Walter Distaso

in The Oxford Handbook of Economic Forecasting

Published in print July 2011 | ISBN: 9780195398649
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195398649.013.0014

Series: Oxford Handbooks

 Multiple Forecast Model Evaluation

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This article focuses on recent developments in the forecasting literature on how to simultaneously control both the overall error rate and the contribution of irrelevant models. As a novel contribution, it derives a general class of superior predictive ability tests, which controls for family-wise error rate (FWER) and the contribution of irrelevant models. The article is organized as follows. Section 2 defines the setup. Section 3 reviews the approaches that control for the conservative FWER. Section 4 considers a general class of tests characterized by multiple joint inequalities. Section 5 presents results allowing for control of the less conservative false discovery rate. Section 6 considers the model confidence set approach and offers a simple alternative that reduces the influence of irrelevant models in the initial set. Section 7 briefly reviews the empirical evidence, while Section 8 concludes.

Keywords: economic forecasting; forecast errors; irrelevant models; predictability tests; error rate; multiple joint inequalities; false discovery rate; model confidence set

Article.  9239 words. 

Subjects: Economics ; Econometric and Statistical Methods and Methodology: General

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