Alternative Variance-Ratio Tests Using Ranks and Signs
AbstractThis article proposes using variance-ratio tests based on the ranks and signs of a time series to test the null that the series is a martingale difference sequence. Unlike conventional variance-ratio tests, these tests can be exact. In Monte Carlo simulations, I find that they can also be more powerful than conventional variance-ratio tests. I apply the proposed tests to five exchange-rate series and find that they are capable of detecting violations of the martingale hypothesis for all five series, whereas conventional variance-ratio tests yield ambiguous results.
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Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 18 (2000)
Issue (Month): 1 (January)
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Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main
Other versions of this item:
- Tom Doan, . "RATS programs to replicate Wright's Alternative Variance Ratio test results," Statistical Software Components RTZ00168, Boston College Department of Economics.
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