Forecast evaluation tests and negative long-run variance estimates in small samples

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Forecast evaluation tests and negative long-run variance estimates in small samples

In this paper, we show that when computing standard Diebold-Mariano-type tests for equal forecast accuracy and forecast encompassing, the long-run variance can frequently be negative when dealing with multi-step-ahead predictions in small, but empirically relevant, sample sizes. We subsequently cons...

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Bibliographic Details
Main Authors:	Harvey, David I., Leybourne, Stephen J., Whitehouse, Emily J.
Format:	Article
Published:	Elsevier 2017
Subjects:	Forecast evaluation; Long-run variance estimation; Simulation; Diebold-Mariano test; Forecasting
Online Access:	https://eprints.nottingham.ac.uk/43017/

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