When Are Variance Ratio Tests for Serial Dependence Optimal?
AbstractThis paper considers a class of statistics that can be written as the ratio of the sample variance of a filtered time series to the sample variance of the original series. Any such statistic is shown to be optimal under normality for testing a null of white noise against some class of serially dependent alternatives. A simple characterization of the alternative class is provided. The results are used to show that a variance ratio test for mean reversion is an optimal test and to illustrate the forms of mean reversion it is best at detecting. Copyright 1992 by The Econometric Society.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 60 (1992)
Issue (Month): 5 (September)
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