The Federal Reserve Board eagle logo links to Board's home page

International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Parameter Constancy, Mean Square Forecast Errors, and Measuring Forecast Perfomance: An Exposition, Extensions, and Illustration
Neil R. Ericsson
1991-412  (October 1991)

Abstract:  Parameter constancy and a model's mean square forecast error are two commonly used measures of forecast performance. By explicit consideration of the information sets involved, this paper clarifies the roles that each plays in analyzing a model's forecast accuracy. Both criteria are necessary for "good" forecast performance, but neither (nor both) is sufficient. Further, these criteria fit into a general taxonomy of model evaluation statistics, and the information set corresponding to a model's mean square forecast error leads to a new test statistic, forecast-model encompassing. Two models of U.K. money demand illustrate the various measures of forecast accuracy.

Full paper(451 KB PDF)

PDF files: Adobe Acrobat Reader   ZIP files: PKWARE

Home | IFDPs | List of 1991 IFDPs
Accessibility | Contact Us
Last update: October 16, 2008