文章基本信息

标题：Testing for equal predictive accuracy with strong dependence
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作者：Laura Coroneo ; Fabrizio Iacone
期刊名称：Discussion Papers in Economics / Department of Economics, University of York
出版年度：2021
卷号：21
语种：English
出版社：University of York
摘要：We revisit the Diebold and Mariano (1995) test, investigating the consequences of having autocorrelation in the loss differential. This situation can arise not only when a forecast is sub-optimal under MSE loss, but also when it is optimal under an alternative loss, or it is evaluated on a short sample, or when a forecast with weakly dependent forecast errors is compared to a naive benchmark. We show that the power of the Diebold and Mariano (1995) test decreases as the dependence increases, making it more difficult to obtain statistically significant evidence of superior predictive ability against less accurate benchmarks. Moreover, we find that after a certain threshold the test has no power and the correct null hypothesis is spuriously rejected. Taken together, these results caution to seriously consider the dependence properties of the selected forecast and of the loss differential before the application of the Diebold and Mariano (1995) test, especially when naive benchmarks are considered.