A note on the Hiemstra-Jones test for Granger non-causality
AbstractWe address a consistency problem in the commonly used nonparametric test for Granger causality developed by Hiemstra and Jones (1994). We show that the relationship tested is not implied by the null hypothesis of Granger non-causality. Monte Carlo simulations using processes satisfying the null hypothesis show that, for a given nominal size, the actual rejection rate may tend to one as the sample size increases. Our results imply that evidence for nonlinear Granger causality reported in the applied empirical literature should be re-interpreted.
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Bibliographic InfoPaper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 04-10.
Date of creation: 2004
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Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
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Other versions of this item:
- Diks Cees & Panchenko Valentyn, 2005. "A Note on the Hiemstra-Jones Test for Granger Non-causality," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 9(2), pages 1-9, June.
- 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 &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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- Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2002. "Relationships between Australian Real Estate and Stock Market Prices--A Case of Market Inefficiency," Journal of Forecasting, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(3), pages 181-92, April.
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"Linear and non-linear transmission of equity return volatility: evidence from the US, Japan and Australia,"
Economic Modelling, Elsevier,
Elsevier, vol. 17(4), pages 497-513, December.
- Brooks, C. & Henry, O.T., 1999. "Linear and Non-Linear Transmission of Equity Return Volatility: Evidence From the US, Japan, and Australia," Department of Economics - Working Papers Series, The University of Melbourne 676, The University of Melbourne.
- Asimakopoulos, Ioannis & Ayling, David & Mansor Mahmood, Wan, 2000. "Non-linear Granger causality in the currency futures returns," Economics Letters, Elsevier, Elsevier, vol. 68(1), pages 25-30, July.
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