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Comparing Predictive Accuracy I: An Asymptotic Test

Discussion Paper 52 | Published September 1, 1991

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Authors

Francis X. Diebold

Roberto S. Mariano

Comparing Predictive Accuracy I: An Asymptotic Test

Abstract

We propose and evaluate an explicit test of the null hypothesis of no difference in the accuracy of two competing forecasts. In contrast to previously developed tests, a wide variety of accuracy measures can be used (in particular, the loss function need not be quadratic, and need not even be symmetric), and forecast errors can be non-Gaussian, nonzero mean, serially correlated and contemporaneously correlated.