In-Sample Test

An In-of-Sample Test is a sample-based test that ...

• • …
• Counter-Example(s):
  • an Out-Sample Test.
• See: Cross-Validation Test, Intrinsic Performance.

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References

2005

• (Inoue & Kilian, 2005) ⇒ Atsushi Inoue, and Lutz Kilian. (2005). “In-Sample or Out-of-Sample Tests of Predictability: Which one should we use?.” In: Econometric Reviews, 23(4). doi:10.1081/ETC-200040785
  • ABSTRACT: It is widely known that significant in-sample evidence of predictability does not guarantee significant out-of-sample predictability. This is often interpreted as an indication that in-sample evidence is likely to be spurious and should be discounted. In this paper, we question this interpretation. Our analysis shows that neither data mining nor dynamic misspecification of the model under the null nor unmodelled structural change under the null are plausible explanations of the observed tendency of in-sample tests to reject the no-predictability null more often than out-of-sample tests. We provide an alternative explanation based on the higher power of in-sample tests of predictability in many situations. We conclude that results of in-sample tests of predictability will typically be more credible than results of out-of-sample tests.

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