Comparing Predictive Accuracy in Small Samples Using Fixed-Smoothing Asymptotics

We consider fixed-smoothing asymptotics for the Diebold and Mariano (1995) test of predictive accuracy. We show that this approach delivers predictive accuracy tests that are correctly sized even when only a small number of out of sample observations are available. We apply the fixed-smoothing asymptotics to the Diebold and Mariano (1995) test to evaluate the predictive accuracy of the Survey of Professional Forecasters (SPF) and the ECB Survey of Professional Forecasters (ECB SPF) against a simple random walk. Our results show that the predictive abilities of the SPF and the ECB SPF were partially spurious