Conditional predictive density evaluation in the presence of instabilities
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We propose new methods for evaluating predictive densities. The methods include Kolmogorov-Smirnov and Cramr-von Mises-type tests for the correct specification of predictive densities robust to dynamic mis-specification. The novelty is that the tests can detect mis-specification in the predictive densities even if it appears only over a fraction of the sample, due to the presence of instabilities. Our results indicate that our tests are well sized and have good power in detecting mis-specification in predictive densities, even when it is time-varying. An application to density forecasts of the Survey of Professional Forecasters demonstrates the usefulness of the proposed methodologies. 2013 Elsevier B.V. All rights reserved.
author list (cited authors)
Rossi, B., & Sekhposyan, T.
complete list of authors
Rossi, Barbara||Sekhposyan, Tatevik