From Open Risk Manual
Diagnostic Tests are Quantitative Tests performed after a model has been estimated, primarily in order to examine the adequacy of model specification.
The nature of diagnostic tests depends on the model being estimated.
- When estimating econometric models, diagnostic tests are focusing on the analysis of residual errors
- Classification models may employ a variety of Discriminatory Power metrics etc.
- Model Selection may be based on Information Criteria
Issues and Challenges
- Variety of tests with convention rather than intrinsic superiority as to the optimal set of diagnostics
- Empirical levels (also set by convention) for accepting test results