Conditional evaluation of predictive models: The cspa command

• Main Authors: LI, Jia, LIAO, Zhipeng, QUAEDVLIEG, Rogier, ZHOU, Wenyu
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: cspa; conditional moment inequality; forecast evaluation; functional inference; series estimation; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2700; https://ink.library.smu.edu.sg/context/soe_research/article/3699/viewcontent/CSPAstata_av.pdf
• Institution: Singapore Management University

In this article, we introduce a new command, cspa, that implements the conditional superior predictive ability test developed in Li, Liao, and Quaedvlieg (2022, Review of Economic Studies 89: 843–875). With the conditional performance of predictive methods measured nonparametrically by the conditional expectation functions of their predictive losses, we test the null hypothesis that a benchmark model weakly outperforms a collection of competitors uniformly across the conditioning space. The proposed command can implement this test for both independent cross-sectional data and serially dependent time-series data. Confidence sets for the most superior model can be obtained by inverting the test, for which the cspa command also offers a convenient implementation.