This is the program for the 2010 Joint Statistical Meetings in Vancouver, British Columbia.

Abstract Details

Activity Number: 298
Type: Contributed
Date/Time: Tuesday, August 3, 2010 : 8:30 AM to 10:20 AM
Sponsor: Business and Economic Statistics Section
Abstract - #308573
Title: Autocontour-Based Evaluation of Out-of-Sample Density Forecasts
Author(s): Emre Yoldas*+ and Gloria Gonzalez-Rivera
Companies: Bentley University and University of California, Riverside
Address: 208 Morison Hall, Waltham, MA, 02452,
Keywords: Probability Contour Plot ; Probability Integral Transform ; Bootstrap ; Multivariate GARCH Model
Abstract:

In this paper, we adopt the recently developed autocontour methodology to evaluation of out-of-sample density forecasts. The original framework introduces a battery of t and chi-squared tests for specification and density functional form in dynamic econometric models. We generalize the autocontour approach to test the dynamic and distributional properties of probability integral transforms, which is the most common tool to evaluate density forecasts. We consider one-step ahead density forecasts and derive the asymptotic distributions of the test statistics under different forecasting schemes. We investigate finite-sample performance of the tests by Monte-Carlo simulation based on VARs with Gaussian and multivariate Student-t innovations. In an empirical application, we evaluate the out-of-sample density forecasts for the returns on U.S. equity style portfolios.


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