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Abstract Details
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Activity Number:
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20
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Type:
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Topic Contributed
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Date/Time:
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Sunday, July 31, 2011 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #301570 |
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Title:
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Forecast Optimality Tests in the Presence of Instabilities
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Author(s):
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Tatevik Sekhposyan*+ and Barbara Rossi
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Companies:
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Bank of Canada and Duke University
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Address:
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234 Wellington Street, Ottawa, ON, K1R 1C8, Canada
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Keywords:
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Density Forecasts ;
Model Selection ;
Structural Change ;
Forecast Evaluation ;
Real-time data
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Abstract:
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This paper proposes forecast optimality tests that can be used in unstable environments. Forecast optimality tests include tests for forecast unbiasedness, efficiency, encompassing, serial (un)correlation, and, in general, regression-based tests of forecasting ability. The proposed tests are applied to evaluate the rationality of the Federal Reserve's Greenbook and a variety of survey-based private forecasts. The proposed tests are also applied to study whether the Federal Reserve has additional information about the current and future states of the economy relative to market participants. Our robust tests suggest more empirical evidence against forecast rationality than previously found. However, the hypothesis on Federal Reserves' forecast superiority over the private sector continues to hold.
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