Diebold_Mariano Test

[donihue]

Hello,

Would anyone have an EViews code to produce the Diebold-Mariano Predictive Accuracy Test (Diebold, F.X. and R. S. Mariano, "Comparing Predictive Accuracy", J. Bus and Ec Stat, Vol. 13, No. 3, July 1995)?

Regards
Donihue

[Savy]

Hi donihue

In its simple form, the DM test can be calculated by regressing the difference of the loss functions (squared or absolute error) on a constant using Newey-West standard errors

Code: Select all

'fc1: Forecast 1 'fc2: Forecast 2 'r: Realised Data ' MSE es_fc1 = (fc1 - r)^2 es_fc2 = (fc2 - r)^2 genr d_squaredloss = es_fc1 - es_fc2 ' MAE ea_fc1 = @abs(fc1 - r) ea_fc2 = @abs(fc2 - r) genr d_absloss = ea_fc1 - ea_fc2 ' DM test equation dm_squaredloss.ls(n) d_squaredloss c equation dm_abs.ls(n) d_absloss c

However, be aware of certain limits of the DM test. For the small sample bias correction, check
Harvey, Leybourne and Newbold, "Testing the equality of prediction mean squared errors", 1998
and for a more general discussion, check e.g.
Giacomini and White, "Tests of Conditional Predictive Ability", 2006

Best
Savy

[donihue]

Many thanks, Savy. That is very helpful indeed.

Regards
Donihue

[stasibab]

I am trying to use this code for the DM test but I get the error as in the image...
Could you help me?

[EViews Gareth]

Put a genr in front of the line that sets them.

[stasibab]

Thanx Gareth,

I 've done what you said, I pressed run without having any errors but I do not get any results...

Do I have to do something else to see the results?

[EViews Gareth]

I don't know enough about the test to say what the results should be. The code generates an equation object, which will be in your workfile. Which of the equation results you need to look at though, I don't know. I'm sure you can figure that bit out though.

[stasibab]

Dear Gareth, the problem is that I do not get the workfile either...
any ideas why? this is my data

when I press run and I get a new box 'run program' I should just press 'ok' right?

Sorry if the questions are stupid, I am quite a rookie...

[EViews Gareth]

Your screenshot clearly indicates that you have a workfile open.

[stasibab]

Excuse me bad writing, I meant I do not get the new object into the workfile!

[EViews Gareth]

You should have an equation object called dm_squaredloss and one called dm_abs

[stasibab]

Sorry I run it, I do not get any errors but nothing is added in my workfile... Strange?

[Abdelrazzaq]

I did run the test and had the results. I think the result is not valid enough . t statistic. please find attached.

[Abdelrazzaq]

please give me some attention