Confidence Bands for ROC Curves with Serially Dependent Data

Our simulation experiments confirm that this new method performs fairly well in finite samples, and confers an additional measure of robustness to non-normality. The conventional procedure is found to be markedly undersized in terms of yielding empirical coverage probabilities lower than the nominal level, especially when the serial correlation is strong.

An example from macroeconomic forecasting demonstrates the importance of accounting for serial correlation when the probability forecasts for real GDP declines are evaluated using ROC.