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Generalized spectral tests for the martingale difference hypothesis

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dc.affiliation.dptoUC3M. Departamento de Estadísticaes
dc.contributor.authorEscanciano, Juan Carlos
dc.contributor.authorVelasco, Carlos
dc.date.accessioned2006-11-09T10:53:44Z
dc.date.available2006-11-09T10:53:44Z
dc.date.issued2003-10
dc.description.abstract^aThis article proposes a test for the Martingale Difference Hypothesis (MDH) using dependence measures related to the characteristic function. The MDH typically has been tested using the sample autocorrelations or in the spectral domain using the periodogram. Tests based on these statistics are inconsistent against uncorrelated non-martingales processes. Here, we generalize the spectral test of Durlauf (1991) for testing the MDH taking into account linear and nonlinear dependence. Our test considers dependence at all lags and is consistent against general pairwise nonparametric Pitman's local alternatives converging at the parametric rate n^(-1/2), with n the sample size. Furthermore, with our methodology there is no need to choose a lag order, to smooth the data or to formulate a parametric alternative. Our approach can be easily extended to specification testing of the conditional mean of possibly nonlinear models. The asymptotic null distribution of our test depends on the data generating process, so a bootstrap procedure is proposed and theoretically justified. Our bootstrap test is robust to higher order dependence, in particular to conditional heteroskedasticity. A Monte Carlo study examines the finite sample performance of our test and shows that it is more powerful than some competing tests. Finally, an application to the S and P 500 stock index and exchange rates highlights the merits of our approach.es
dc.format.extent488468 bytes
dc.format.mimetypeapplication/pdf
dc.identifier.repecws035312
dc.identifier.urihttps://hdl.handle.net/10016/200
dc.language.isoeng
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working Papers. Statistics and Econometrics;
dc.relation.ispartofseries2003-12
dc.rights.accessRightsopen access
dc.subject.ecienciaEstadística
dc.titleGeneralized spectral tests for the martingale difference hypothesis
dc.typeworking paper*
dspace.entity.typePublication
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