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Comparing predictive accuracy in small samples using fixed-smoothing asymptotic

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JournalJournal of Applied Econometrics
DateAccepted/In press - 19 Jan 2020
DateE-pub ahead of print - 28 Apr 2020
DatePublished (current) - 1 Jun 2020
Issue number4
Volume35
Number of pages19
Pages (from-to)391-405
Early online date28/04/20
Original languageEnglish

Abstract

We consider fixed-smoothing asymptotics for the Diebold and Mariano (1995) test of predictive accuracy. We show that this approach delivers predictive accuracy tests that are correctly sized even when only a small number of out of sample observations is available. We
apply the fixed-smoothing asymptotics to the Diebold and Mariano (1995) test to evaluate the predictive accuracy of the Survey of Professional Forecasters (SPF) and of the ECB Survey of Professional Forecasters (ECB SPF) against a simple random walk. Our results
show that the predictive abilities of the SPF and of the ECB SPF were partially spurious.

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© 2020 The Authors

    Research areas

  • Diebold and Mariano test, long run variance estimation, fixed-smoothing asymptotics, Heteroskedasticity-Autocorrelation Robust (HAR) inference, SPF

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