Finite-sample properties of tests for equal forecast accuracy

This study examines the small-sample properties of some commonly used tests of equal forecast accuracy. The paper considers the size and power of different tests and the performance of different heteroscedasticity and autocorrelation-consistent (HAC) variance estimators. Monte Carlo experiments show that the tests all suffer some size distortions in small samples, with the distortions varying across tests. The experiments also show that, adjusted for size distortions, the tests have broadly similar power, although some small differences exist. Finally, the experiments indicate that the size and power performances of HAC estimators vary with the features of the data.