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Evaluation and combination of conditional quantile forecasts

Giacomini, Raffaella and Komunjer, Ivana (2005) Evaluation and combination of conditional quantile forecasts. Journal of Business & Economic Statistics, 23 (4). pp. 416-431. ISSN 0735-0015. http://resolver.caltech.edu/CaltechAUTHORS:GIAjbes05

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Abstract

We propose an encompassing test for comparing conditional quantile forecasts in an out-of-sample framework. Our test provides a basis for forecast combination when encompassing is rejected. Its central features are (1) use of the "tick" loss function, (2) a conditional approach to out-of-sample evaluation, and (3) derivation in an environment with asymptotically nonvanishing estimation uncertainty. Our approach is valid under general conditions; the forecasts can be based on nested or nonnested models and can be obtained by general estimation procedures. We illustrate the test properties in a Monte Carlo experiment and apply it to evaluate and compare four popular value-at-risk models.


Item Type:Article
Additional Information:© 2005 American Statistical Association. Received July 2002. Revised September 2004. The authors thank Graham Elliott, Clive Granger, Jose Lopez, Andrew Patton, and Kevin Sheppard, as well as the participants to the 2003 ASSA meeting in Washington, DC, UTS workshop, and Duke Conference on Forecasting, for their valuable comments and suggestions, and Peter Christoffersen and Eric Ghysels for providing their data. They also thank the editors, the associate editor, and two anonymous referees for their useful comments that led to a considerably improved version of the article. Any remaining errors are the authors’ own.
Subject Keywords:ENCOMPASSING; GENERALIZED METHOD OF MOMENTS; TICK LOSS FUNCTION; VALUE-AT-RISK
Record Number:CaltechAUTHORS:GIAjbes05
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:GIAjbes05
Alternative URL:http://dx.doi.org/10.1198/073500105000000018
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:10429
Collection:CaltechAUTHORS
Deposited By: Lindsay Cleary
Deposited On:06 May 2008
Last Modified:26 Dec 2012 10:00

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