Comparing Predictive Accuracy, Twenty Years Later: A Personal Perspective on the Use and Abuse of Diebold–Mariano Tests

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The Diebold-Mariano (DM) test was intended for comparing forecasts; it has been, and remains, useful in that regard. The DM test was not intended for comparing models. Much of the large ensuing literature, however, uses DM-type tests for comparing models, in pseudo-out-of-sample environments. In that case, simpler yet more compelling full-sample model comparison procedures exist; they have been, and should continue to be, widely used. The hunch that pseudo-out-of-sample analysis is somehow the “only,” or “best,” or even necessarily a “good” way to provide insurance against in-sample over-fitting in model comparisons proves largely false. On the other hand, pseudo-out-of-sample analysis remains useful for certain tasks, perhaps most notably for providing information about comparative predictive performance during particular historical episodes. Key

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  • Forecasting
  • Model comparison
  • Model selection
  • Out-of-sample tests

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  • Francis X. Diebold

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