Regression-Based Tests of Predictive Ability / Kenneth D. West, Michael W. McCracken.

Format:

Book

Author/Creator:

West, Kenneth D.

Contributor:

National Bureau of Economic Research.

McCracken, Michael W.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0226.

NBER technical working paper series no. t0226

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

We develop regression-based tests of hypotheses about out of sample prediction errors. Representative tests include ones for zero mean and zero correlation between a prediction error and a vector of predictors. The relevant environments are ones in which predictions depend on estimated parameters. We show that standard regression statistics generally fail to account for error introduced by estimation of these parameters. We propose computationally convenient test statistics that properly account for such error. Simulations indicate that the procedures can work well in samples of size typically available, although there sometimes are substantial size distortions.

Notes:

Print version record

March 1998.