Evaluating Forecasts of a Vector of Variables: A German Forecasting Competition

In this paper we explore methodologies appropriate for evaluating a forecasting competition when the participants predict a number of variables that may be related to each other and are judged for a single period. Typically, forecasting competitions are judged on a variable‐by‐variable basis, but a multivariate analysis is required to determine how each competitor performed overall. We use three different multivariate tests to determine an overall winner for a forecasting competition for the German economy across 25 different institutions for a single time period using a vector of eight key economic variables. We find that neglecting the cross‐variable relationships greatly alters the outcome of the forecasting competition.