Evaluating Density Forecasts

Francis X. Diebold, Todd A. Gunther, Anthony S. Tay

NBER Technical Working Paper No. 215
Issued in October 1997
NBER Program(s):   EFG

We propose methods for evaluating density forecasts. We focus primarily on methods" that are applicable regardless of the particular user's loss function. We illustrate the methods" with a detailed simulation example, and then we present an application to density forecasting of" daily stock market returns. We discuss extensions for improving suboptimal density forecasts multi-step-ahead density forecast evaluation, multivariate density forecast evaluation for structural change and its relationship to density forecasting, and density forecast evaluation" with known loss function.

(888 K)

Published: (newly titled "Evaluating Density Forecasts, with Applications to Financial Risk Management") International Economic Review, Vol. 39 (1998): 863-883.

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