Luca Margaritella, Ovidijus Stauskas
arXiv 30 Sep 2024 · Econometrics
arXiv:2409.20415 · PDF · DOI · OpenAlex · Extracted main text
We provide the theoretical foundation for the recent tests of equal forecast accuracy and encompassing by Pitarakis (2023) and Pitarakis (2025), when the competing forecast specification is that of a factor-augmented regression model. This should be of interest for practitioners, as there is no theory justifying the use of these simple and powerful tests in such context. In pursuit of this, we employ a novel theory to incorporate the empirically well-documented fact of homogeneously/heterogeneously weak factor loadings, and track their effect on the forecast comparison problem.
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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 | Clark, T. E. & McCracken, M. W (2001) Tests of equal forecast accuracy and encompassing for nested models | 0.941 | 6 | 3 | 83% |
| 2 | Pitarakis, J.-Y (2023) Direct multi-step forecast based comparison of nested models via an encompassing test | 0.916 | 26 | 10 | 77% |
| 3 | Bai, J. & Ng, S (2002) Determining the number of factors in approximate factor models | 0.894 | 14 | 6 | 71% |
| 4 | Uematsu, Y. & Yamagata, T (2022) Inference in sparsity-induced weak factor models | 0.874 | 5 | 2 | 100% |
| 5 | Pitarakis, J.-Y (2025) A novel approach to predictive accuracy testing in nested environments | 0.843 | 35 | 10 | 60% |
| 6 | Stauskas, O. & Westerlund, J (2022) Tests of equal forecasting accuracy for nested models with estimated cce factors self | 0.843 | 10 | 6 | 60% |
| 7 | Goncalves, S., McCracken, M. W., & Perron, B (2017) Tests of equal accuracy for nested models with estimated factors | 0.819 | 31 | 5 | 55% |
| 8 | Bai, J. & Ng, S (2023) Approximate factor models with weaker loadings | 0.766 | 49 | 7 | 45% |
| 9 | Hansen, B. E (1992) Convergence to stochastic integrals for dependent heterogeneous processes | 0.737 | 4 | 3 | 50% |
| 10 | Bai, J. & Ng, S (2006) Confidence intervals for diffusion index forecasts and inference for factor-augmented regressions | 0.737 | 3 | 2 | 100% |
Showing the top 10 of 45 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Robust Tests for Factor-Augmented Regressions with an Application to the Novel EA-MD-QD Dataset | 0.965 | 10 | 5 |