The role of the information set for forecasting - with applications to risk management

Predictions are issued on the basis of certain information. If the forecasting mechanisms are correctly specified, a larger amount of available information should lead to better forecasts. For point forecasts, we show how the effect of increasing the information set can be quantified by using strictly consistent scoring functions, where it results in smaller average scores. Further, we show that the classical Diebold-Mariano test, based on strictly consistent scoring functions and asymptotically...