Ch 11 - Optimal forecasts and forecast evaluation Flashcards
1
Q
Given a loss function L, an optimal forecast is obtained by minimising the __________________
A
Conditional expectation of the future loss
2
Q
What is a limitation of the quadratic loss function model?
A
The quadratic loss function model imposes the assumption that positive and negative forecast errors of the same size carry the same penalty
3
Q
Under MSE loss, what properties are true of optimal forecasts?
A
Optimal forecasts are unbiased
Optimal forecast errors have 0 autocorrelation for lags greater than or equal to h
The variance of the optimal forecast error is increasing in h
4
Q
What is a Mincer-Zarnowitz regression?
A
One where the dependent variable is regressed on the forecast
