TY  - JOUR
AU  - West,Kenneth D.
AU  - McCracken,Michael W.
TI  - Regression-Based Tests of Predictive Ability
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 226
PY  - 1998
Y2  - March 1998
UR  - http://www.nber.org/papers/t0226
L1  - http://www.nber.org/papers/t0226.pdf
N1  - Author contact info:
Kenneth D. West
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706
Tel: 608/262-0033
Fax: 608/262-2033
E-Mail: kdwest@wisc.edu
AB  - We develop regression-based tests of hypotheses about out of sample prediction errors.  Representative tests include ones for zero mean and zero correlation between a prediction error and a vector of predictors.  The relevant environments are ones in which predictions depend on estimated parameters.  We show that standard regression statistics generally fail to account for error introduced by estimation of these parameters.  We propose computationally convenient test statistics that properly account for such error.  Simulations indicate that the procedures can work well in samples of size typically available, although there sometimes are substantial size distortions.
ER  -