Comparing forecast accuracy in small samples

Roland Döhrn

The Diebold-Mariano-Test has become a common tool to compare the accuracy of macroeconomic forecasts. Since these are typically model-free forecasts, distribution free tests might be a good alternative to the Diebold-Mariano-Test. This paper suggests a permutation test. Stochastic simulations show that permutation tests outperform the Diebold-Mariano-Test. Furthermore, a test statistic based on absolute errors seems to be more sensitive to differences in forecast accuracy than a statistic based on squared errors.

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Year of publication:	December 2019
Authors:	Döhrn, Roland
Publisher:	Bochum, Germany : Ruhr-Universität Bochum (RUB), Department of Economics
Subject:	Macroeconomic forecast \| forecast accuracy \| Diebold-Mariano test \| permutation test \| Prognoseverfahren \| Forecasting model \| Wirtschaftsprognose \| Economic forecast \| Statistischer Test \| Statistical test \| Stichprobenerhebung \| Sampling \| Prognose \| Forecast \| Theorie \| Theory \| Frühindikator \| Leading indicator