Tests of Conditional Predictive Ability: A Comment

RePEc Short ID: pmc81
ORCID iD: 0000-0002-7004-1233

McCracken, Michael W.

doi:10.20955/wp.2019.018

Working Paper

Tests of Conditional Predictive Ability: A Comment

Abstract: We investigate a test of equal predictive ability delineated in Giacomini and White (2006; Econometrica). In contrast to a claim made in the paper, we show that their test statistic need not be asymptotically Normal when a fixed window of observations is used to estimate model parameters. An example is provided in which, instead, the test statistic diverges with probability one under the null. Simulations reinforce our analytical results.

Keywords: prediction; out-of-sample; inference;

JEL Classification: C12; C52; C53;

https://doi.org/10.20955/wp.2019.018