Evaluating Density Forecasts: A Comment

Evaluating density forecasts: a comment

Evaluating Density Forecasts via the Copula Approach

In this paper, we develop parametric tests for the correct density forecasts. Similar to Berkowitz (2001), we construct our tests by nesting a series of i.i.d. uniform random variables in a class of stationary Markov processes. Unlike Berkowitz (2001), the class of Markov processes in this paper is constructed via the copula approach, which allows the separate modeling of the marginal distribut...

Evaluating the Bank of England Density Forecasts of Inflation

We consider evaluating the UK Monetary Policy Committee’s inflation density forecasts using probability integral transform goodness-of-fit tests and measures related to a decision/cost based approach. In implementing the decision-based approach a number of difficulties arise in the absence of full information on payoffs, and when the actual and forecast inflation probabilities may depend on the...

Weighted Likelihood Ratio Scores for Evaluating Density Forecasts in Tails∗

We propose and evaluate several new scoring rules based on likelihood ratios, for comparing density forecasts in the context of VaR modelling and expected loss estimation. Our approach is motivated by the observation that some existing weighted scoring rules tend to favour fat-tailed predictive densities over thin-tailed predictive densities. Rather than restricting the weight functions, we imp...

Evaluating multivariate volatility forecasts

The performance of techniques for evaluating multivariate volatility forecasts are not yet as well understood as their univariate counterparts. This paper aims to evaluate the efficacy of a range of traditional statistical-based methods for multivariate forecast evaluation together with methods based on underlying considerations of economic theory. It is found that statistical-based methods, or...