Out-of-Sample Forecast Tests Robust to Window Size Choice

This paper proposes new methodologies for evaluating out-of-sample forecasting performance that are robust to the choice of the estimation window size. The methodologies involve evaluating the predictive ability of forecasting models over a wide range of window sizes. We show that the tests proposed in the literature may lack power to detect predictive ability, and might be subject to data snooping across different window sizes if used repeatedly. An empirical application shows the usefulness of the methodologies for evaluating exchange rate models' forecasting ability.