A New Test of the Martingale Difference Hypothesis
AbstractIn this paper we propose a new class of tests for the martingale difference hypothesis based on the moment conditions derived by Bierens (1982). In contrast with the existing consistent tests, the proposed test has a standard limiting distribution and is easy to implement. Comparing with many commonly used autocorrelation- and spectrum-based tests, it has better power against a larger class of alternatives that may be serially correlated or uncorrelated. Moreover, this test does not rely on the assumption of conditional homoskedasticity and requires a weaker moment condition. Our simulations confirm that the proposed test is powerful against various linear and nonlinear alternatives and is quite robust to the failure of higher-order moments. Our empirical study on exchange rate returns also shows that the conclusion resulted from the proposed test is different from that of the conventional tests.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 8 (2004)
Issue (Month): 4 (December)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- Chung-Ming Kuan & Wei-Ming Lee, 2003. "A New Test of the Martingale Difference Hypothesis," IEAS Working Paper : academic research 03-A001, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Escanciano, J. Carlos & Velasco, Carlos, 2006.
"Generalized spectral tests for the martingale difference hypothesis,"
Journal of Econometrics,
Elsevier, vol. 134(1), pages 151-185, September.
- Escanciano, Juan Carlos & Velasco, Carlos, 2006. "Generalized spectral tests for the martingale difference hypothesis," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4360, Universidad Carlos III de Madrid.
- J. Carlos Escanciano & Carlos Velasco, 2003. "Generalized Spectral Tests For The Martingale Difference Hypothesis," Statistics and Econometrics Working Papers ws035212, Universidad Carlos III, Departamento de Estadística y Econometría.
- Park, Joon Y. & Whang, Yoon-Jae, 2004.
"A Test of the Martingale Hypothesis,"
2004-11, Rice University, Department of Economics.
- Charles, Amélie & Darné, Olivier & Kim, Jae H., 2012.
"Exchange-rate return predictability and the adaptive markets hypothesis: Evidence from major foreign exchange rates,"
Journal of International Money and Finance,
Elsevier, vol. 31(6), pages 1607-1626.
- Amélie Charles & Olivier Darné & Jae H. Kim, 2010. "Exchange-Rate Return Predictability and the Adaptive Markets Hypothesis: Evidence from Major Foreign Exchange Rates," Working Papers hal-00547722, HAL.
- Yi-Ting Chen & Chung-Ming Kuan, 2003. "A Generalized Jarque-Bera Test of Conditional Normality," IEAS Working Paper : academic research 03-A003, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- Friedrich Geiecke & Mark Trede, 2010. "A Direct Test of Rational Bubbles," CQE Working Papers 1310, Center for Quantitative Economics (CQE), University of Muenster.
- Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.