Measuring Predictability: Theory and Macroeconomic Applications

@article{Diebold1997MeasuringPT,
  title={Measuring Predictability: Theory and Macroeconomic Applications},
  author={Francis X. Diebold and Lutz Kilian},
  journal={Macroeconomics eJournal},
  year={1997}
}
We propose a measure of predictability based on the ratio of the expected loss of a short-run forecast to the expected loss of a long-run forecast. This predictability measure can be tailored to the forecast horizons of interest, and it allows for general loss functions, univariate or multivariate information sets, and stationary or nonstationary data. We propose a simple estimator, and we suggest resampling methods for inference. We then provide several macroeconomic applications. First, based… 
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