Testing for Bias in Forecasts for Independent Multinomial Outcomes
This paper deals with a test on forecast bias in predicting independent multinomial outcomes where the predictions are probabilities. The new Likelihood Ratio (and Wald) test extends the familiar Mincer Zarnowitz regression to a multinomial logit model instead of a linear regression. The test is eva...
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| Format: | Article |
| Language: | English |
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MDPI AG
2025-01-01
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| Series: | Forecasting |
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| Online Access: | https://www.mdpi.com/2571-9394/7/1/4 |
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| author | Philip Hans Franses Richard Paap |
| author_facet | Philip Hans Franses Richard Paap |
| author_sort | Philip Hans Franses |
| collection | DOAJ |
| description | This paper deals with a test on forecast bias in predicting independent multinomial outcomes where the predictions are probabilities. The new Likelihood Ratio (and Wald) test extends the familiar Mincer Zarnowitz regression to a multinomial logit model instead of a linear regression. The test is evaluated using various simulation experiments, which indicate that the size and power properties are good, even for small sample sizes, in the sense that the size is close to the used 5% level, and the power quickly reaches 1. We implement the test in an empirical setting on brand choice by individual households. |
| format | Article |
| id | doaj-art-d7c41d00ca8c4b4dba00cbbb960f0436 |
| institution | OA Journals |
| issn | 2571-9394 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Forecasting |
| spelling | doaj-art-d7c41d00ca8c4b4dba00cbbb960f04362025-08-20T02:11:17ZengMDPI AGForecasting2571-93942025-01-0171410.3390/forecast7010004Testing for Bias in Forecasts for Independent Multinomial OutcomesPhilip Hans Franses0Richard Paap1Econometric Institute, Erasmus School of Economics, Burgemeester Oudlaan 50, 3062PA Rotterdam, The NetherlandsEconometric Institute, Erasmus School of Economics, Burgemeester Oudlaan 50, 3062PA Rotterdam, The NetherlandsThis paper deals with a test on forecast bias in predicting independent multinomial outcomes where the predictions are probabilities. The new Likelihood Ratio (and Wald) test extends the familiar Mincer Zarnowitz regression to a multinomial logit model instead of a linear regression. The test is evaluated using various simulation experiments, which indicate that the size and power properties are good, even for small sample sizes, in the sense that the size is close to the used 5% level, and the power quickly reaches 1. We implement the test in an empirical setting on brand choice by individual households.https://www.mdpi.com/2571-9394/7/1/4multinomial outcomesprobability forecastsforecast biasmultinomial logit model |
| spellingShingle | Philip Hans Franses Richard Paap Testing for Bias in Forecasts for Independent Multinomial Outcomes Forecasting multinomial outcomes probability forecasts forecast bias multinomial logit model |
| title | Testing for Bias in Forecasts for Independent Multinomial Outcomes |
| title_full | Testing for Bias in Forecasts for Independent Multinomial Outcomes |
| title_fullStr | Testing for Bias in Forecasts for Independent Multinomial Outcomes |
| title_full_unstemmed | Testing for Bias in Forecasts for Independent Multinomial Outcomes |
| title_short | Testing for Bias in Forecasts for Independent Multinomial Outcomes |
| title_sort | testing for bias in forecasts for independent multinomial outcomes |
| topic | multinomial outcomes probability forecasts forecast bias multinomial logit model |
| url | https://www.mdpi.com/2571-9394/7/1/4 |
| work_keys_str_mv | AT philiphansfranses testingforbiasinforecastsforindependentmultinomialoutcomes AT richardpaap testingforbiasinforecastsforindependentmultinomialoutcomes |