Authors: Mauro Bernardi; Leopoldo Catania
Addresses: Department of Statistical Sciences, University of Padova, Via Cesare Battisti, 241/243, 35121 Padova, Italy ' Department of Economics and Finance, University of Rome, "Tor Vergata", Via Columbia 2, 00135, Rome, Italy
Abstract: This paper presents the R package MCS which implements the model confidence set (MCS) procedure for model comparison. The MCS procedure consists on a sequence of tests which permits to build a set of 'superior' models, where the null hypothesis of equal predictive ability (EPA) is not rejected at a certain confidence level. The EPA statistic test is calculated for an arbitrary loss function, meaning that we could test models on various aspects, such as for example, punctual forecasts and density evaluation. The relevance of the package is shown using an example which aims at illustrating in details the use of the provided functions. The example compares the ability of different models belonging to the generalised autoregressive conditional heteroscedasticity (GARCH) family to predict large financial losses. Codes for reproducibility purposes are also reported.
Keywords: MCS; model confidence set; model choice; R; VaR; value-at-risk.
International Journal of Computational Economics and Econometrics, 2018 Vol.8 No.2, pp.144 - 158
Available online: 23 Feb 2018 *Full-text access for editors Access for subscribers Purchase this article Comment on this article