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Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
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http://hdl.handle.net/10419/25316
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| Title: | | Testing directional forecast value in the presence of serial correlation  |
| Authors: | | Blaskowitz, Oliver J. Herwartz, Helmut |
| Issue Date: | | 2008 |
| Series/Report no.: | | SFB 649 discussion paper 2008,073 |
| Abstract: | | Common approaches to test for the economic value of directional forecasts are based on the classical Chi-square test for independence, Fisher’s exact test or the Pesaran and Timmerman (1992) test for market timing. These tests are asymptotically valid for serially independent observations. Yet, in the presence of serial correlation they are markedly oversized as confirmed in a simulation study. We summarize serial correlation robust test procedures and propose a bootstrap approach. By means of a Monte Carlo study we illustrate the relative merits of the latter. Two empirical applications demonstrate the relevance to account for serial correlation in economic time series when testing for the value of directional forecasts. |
| Subjects: | | Directional forecasts directional accuracy forecast evaluation testing independence contingency tables bootstrap |
| JEL: | | C32 C52 C53 E17 E27 E47 F17 F37 F47 G11 G17 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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