Generalized spectral tests for the martingale difference hypothesis

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Show simple item record Escanciano, Juan Carlos Velasco, Carlos 2009-06-05T14:32:11Z 2009-06-05T14:32:11Z 2006-09
dc.identifier.bibliographicCitation Journal of Econometrics. 2006, vol. 134, nº 1, p. 151-185
dc.identifier.issn 0304-4076
dc.description.abstract This 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 could be 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&P 500 stock index and exchange rates highlights the merits of our approach.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.rights © Elsevier
dc.subject.other Martingale difference hypothesis
dc.subject.other Hilbert spaces
dc.subject.other Generalized spectral distribution
dc.subject.other Characteristic function
dc.subject.other S&P 500 stock index
dc.subject.other Exchange rates
dc.title Generalized spectral tests for the martingale difference hypothesis
dc.type article PeerReviewed
dc.description.status Publicado
dc.subject.eciencia Economía
dc.identifier.doi 10.1016/j.jeconom.2005.06.019
dc.rights.accessRights openAccess
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