Real-Time Multivariate Density Forecast Evaluation and Calibration: Monitoring the Risk of High-Frequency Returns on Foreign Exchange

We provide a framework for evaluating and improving multivariate density forecasts. Among other things, the multivariate framework lets us evaluate the adequacy of density forecasts involving cross-variable interactions, such as time-varying conditional correlations. We also provide conditions under which a technique of density forecast "calibration" can be used to improve deficient density forecasts. Finally, motivated by recent advances in financial risk management, we provide a detailed application to multivariate high-frequency exchange rate density forecasts. Copyright © 1998 F.X. Diebold, J. Hahn, and A.S. Tay. This paper is also available at

Survival of Phytophthora cinnamomi and P. multivora in Lime-amended Bioclay® (LaBC®) and LaBC® plus organic material

Lime–amended BioClay® (LaBC®) is a high pH product developed as a soil amendment for use on Bassendean Sands of the Swan Coastal Plain. Composted mulch is used to clean equipment used in its production and lower the pH of the final product. If this composted mulch is contaminated with Phytophthora cinnamomi (the dieback fungus) this soil borne pathogen might be inadvertently spread to uninfested properties. In order to determine the likelihood of this occurring, pine plugs colonised by either P. cinnamomi or the similar pathogen P. multivora, were incubated in LaBC® or LaBC® + organic material for up to 21 days. P. cinnamomi survived for less no more than 6 days in both products, while P. multivora survived for no more than than 6 days in LaBC®, and for no more than than 14 days in LaBC® + organic material. This experiment shows that there is minimal risk of LaBC® or LaBC® + organic material being a source of these pathogens

Evaluating Density Forecasts

We propose methods for evaluating density forecasts. We focus primarily on methods that are applicable regardless of the particular user's loss function. We illustrate the methods with a detailed simulation example, and then we present an application to density forecasting of daily stock market returns. We discuss extensions for improving suboptimal density forecasts, multi-step-ahead density forecast evaluation, multivariate density forecast evaluation, monitoring for structural change and its relationship to density forecasting, and density forecast evaluation with known loss function.

Evaluating density forecasts

The authors propose methods for evaluating and improving density forecasts. They focus primarily on methods that are applicable regardless of the particular user's loss function, though they take explicit account of the relationships between density forecasts, action choices, and the corresponding expected loss throughout. They illustrate the methods with a detailed series of examples, and they discuss extensions to improving and combining suboptimal density forecasts, multistep-ahead density forecast evaluation, multivariate density forecast evaluation, monitoring for structural change and its relationship to density forecasting, and density forecast evaluation with known loss function.Forecasting

Direction-of-Change Forecasts for Asian Equity Markets Based on Conditional Variance, Skewness and Kurtosis Dynamics: Evidence from Hong Kong and Singapore

Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-ofchange forecasts useful for market timing. We attempt to do so in the context of two key Asian equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management.

Direction-of-Change Forecasts Based on Conditional Variance, Skewness and Kurtosis Dynamics : International Evidence

Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-of-change forecasts useful for market timing. We attempt to do so in an international sample of developed equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional mean and variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management

Direction-of-Change Forecasts Based on Conditional Variance, Skewness and Kurtosis Dynamics: International Evidence

Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-of change forecasts useful for market timing. We attempt to do so in an international sample of developed equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional mean and variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management

Direction-of-Change Forecasts Based on Conditional Variance, Skewness and Kurtosis Dynamics : International Evidence

Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-of change forecasts useful for market timing. We attempt to do so in an international sample of developed equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional mean and variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management