ON TESTING FOR UNBIASEDNESS AND EFFICIENCY OF FORECASTS*

Abstract

This note demonstrates that the conventional test for unbiasedness of forecasts or expectations of estimating Y = "alpha"(subscript "1") + "beta"(subscript "1")F + u where Y is the outcome and F is the forecast, and testing whether "alpha"(subscript "1" = 0 and "beta"(subscript "1") = 1 is a sufficient, but not a necessary, condition for unbiasedness. A necessary and sufficient condition for unbiasedness, based on the conventional test, is presented. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester