Robust Tests for Factor-Augmented Regressions with an Application to the novel EA-MD-QD Dataset
因子增广回归的稳健检验及其在新 EA-MD-QD 数据集中的应用
We present four novel tests of equal predictive accuracy and encompassing à la Pitarakis (2023, 2025) for factor-augmented regressions, where factors are estimated using cross-section averages (CAs) of grouped series. Our inferential theory is asymptotically normal and robust to an overspecification of the number of factors. Our tests are empirically relevant as they accommodate for different degrees of predictor persistence and remain invariant to the location of structural…