Examinando por Autor "Pincheira, Pablo"

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    Ítem
    Forecasting aluminum prices with commodity currencies
    (Elsevier, 2021-06) Pincheira, Pablo; Hardy, Nicolás
    In this paper we show that the exchange rates of some commodity exporter countries have the ability to predict the price of spot and future contracts of aluminum. This is shown with both in-sample and out-of-sample analyses. The theoretical underpinning of these results relies on the present-value model for exchange rate determination and on the tight connection between some commodity prices and the currencies of some commodity exporter countries. We show results using traditional statistical metrics of forecast accuracy: Mean Squared Prediction Error and Mean Directional Accuracy. We also explore different ways in which we can jointly take advantage of the predictive information contained in all of our commodity-currencies. While LASSO and a model equipped with the first principal component of our currencies perform well, the best combination strategies involve the pre-selection of the two best performing individual currencies: The Chilean Peso and the Icelandic Krona.
  • Miniatura
    Ítem
    “Go Wild for a While!”: A New Test for Forecast Evaluation in Nested Models.
    (MDPI, 2021-09-21) Pincheira, Pablo; Hardy, Nicolás; Muñoz, Felipe
    In this paper, we present a new asymptotically normal test for out-of-sample evaluation in nested models. Our approach is a simple modification of a traditional encompassing test that is commonly known as Clark and West test (CW). The key point of our strategy is to introduce an independent random variable that prevents the traditional CW test from becoming degenerate under the null hypothesis of equal predictive ability. Using the approach developed by West (1996), we show that in our test, the impact of parameter estimation uncertainty vanishes asymptotically. Using a variety of Monte Carlo simulations in iterated multi-step-ahead forecasts, we evaluated our test and CW in terms of size and power. These simulations reveal that our approach is reasonably well-sized, even at long horizons when CW may present severe size distortions. In terms of power, results were mixed but CW has an edge over our approach. Finally, we illustrate the use of our test with an empirical application in the context of the commodity currencies literature