Fabrizio Iacone, Luca Rossini, Andrea Viselli
arXiv 20 May 2024 · Econometrics · publishedEconometrics Journal (2025)
arXiv:2405.11954 · PDF · DOI · OpenAlex · Extracted main text
We consider forecast comparison in the presence of instability when this affects only a short period of time. We demonstrate that global tests do not perform well in this case, as they were not designed to capture very short-lived instabilities, and their power vanishes altogether when the magnitude of the shock is very large. We then discuss and propose approaches that are more suitable to detect such situations, such as nonparametric methods (S test or MAX procedure). We illustrate these results in different Monte Carlo exercises and in evaluating the nowcast of the quarterly US nominal GDP from the Survey of Professional Forecasters (SPF) against a naive benchmark of no growth, over the period that includes the GDP instability brought by the Covid-19 crisis. We recommend that the forecaster should not pool the sample, but exclude the short periods of high local instability from the evaluation exercise.
appendix boundary found by appendix_command · 90% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Giacomini, R. and B. Rossi (2010) Forecast comparisons in unstable environments | 1.000 | 11 | 3 | 100% |
| 2 | Andrews, D. W (2003) End-of-sample instability tests | 0.958 | 25 | 5 | 88% |
| 3 | Giacomini, R. and H. White (2006) Tests of conditional predictive ability | 0.950 | 7 | 3 | 86% |
| 4 | Diebold, F. X. and R. S. Mariano (1995) Comparing Predictive Accuracy | 0.928 | 4 | 3 | 100% |
| 5 | Harvey, D. I., S. J. Leybourne, R. Sollis, and A. R. Taylor (2021) Real-time detection of regimes of predictability in the US equity premium | 0.874 | 7 | 2 | 100% |
| 6 | Leadbetter, M. R., G. Lindgren, and H. Rootzén (1983) Extremes and Related Properties of Random Sequences and Processes | 0.585 | 3 | 1 | 100% |
| 7 | White, H (2000) Asymptotic Theory for Econometricians | 0.511 | 2 | 2 | 50% |
| 8 | Ferreira, H. and M. Scotto (2002) On the asymptotic location of high values of a stationary sequence | 0.511 | 2 | 1 | 100% |
| 9 | Timmermann, A (2008) Elusive return predictability | 0.511 | 2 | 1 | 100% |
| 10 | Coroneo, L. and F. Iacone (2020) Comparing predictive accuracy in small samples using fixed-smoothing asymptotics | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 21 scored citations.