Is One Forecast Model Better Than Another?
Blog post contributed by: Tim DelSole* The Sign Test Is one forecast model better than another? A natural approach to answering this question is to run a set of forecasts with each model and then see which set has more skill. This comparison requires a statistical test to ensure that the estimated difference represents a real difference in skill, rather than a random sampling error. Unfortunately, there are three problems with using standard difference tests: they have low statistical power,…