Ruhr Economic Papers

Ruhr Economic Papers #833

Comparing Forecast Accuracy in Small Samples

by Roland Döhrn

RWI, UDE, 12/2019, 15 S./p., 8 Euro, ISBN 978-3-86788-966-7 DOI: 10.4419/86788966

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Abstract

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.

JEL-Classification: C14, C15, C53

Keywords: Macroeconomic forecast; forecast accuracy; Diebold-Mariano test; permutation test

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