A Test for Conditional Symmetry in Time Series Models
AbstractThe assumption of conditional symmetry is often invoked to validate adaptive estimation and consistent estimation of ARCH/GARCH models by quasi maximum likelihood. Imposing conditional symmetry can increase the efficiency of bootstraps if the symmetry assumption is valid. This paper proposes a procedure for testing conditional symmetry. The proposed test does not require the data to be stationary or i.i.d., and the dimension of the conditional variables could be infinite. The size and power of the test are satisfactory even for small samples. In addition, the proposed test is shown to have non-trivial power against root-T local alternatives. Applying the test to various time series, we reject conditional symmetry in inflation, exchange rate and stock returns. These data have previously been tested and rejected for unconditional symmetry. Among the non-financial time series considered, we find that investment, the consumption of durables, and manufacturing employment also reject conditional symmetry. Interestingly, these are series whose dynamics are believed to be affected by fixed costs of adjustments.
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.
Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 410.
Length: 34 pages
Date of creation: 27 Aug 1998
Date of revision:
Contact details of provider:
Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
conditional symmetry; empirical distribution function; kernel estimation; Brownian motion; ARCH/GARCH; nonlinear timeseries;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-08-31 (All new papers)
- NEP-ECM-1998-08-31 (Econometrics)
- NEP-ETS-1998-08-31 (Econometric Time Series)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stoker, Thomas M, 1986. "Consistent Estimation of Scaled Coefficients," Econometrica, Econometric Society, Econometric Society, vol. 54(6), pages 1461-81, November.
- Hodgson, Douglas J., 1998.
"Adaptive Estimation Of Error Correction Models,"
Cambridge University Press, vol. 14(01), pages 44-69, February.
- Gonzalez-Rivera, G., 1995.
"A Note on Adaptation in Garch Models,"
The A. Gary Anderson Graduate School of Management, The A. Gary Anderson Graduate School of Management. University of California Riverside
95-1, The A. Gary Anderson Graduate School of Management. University of California Riverside.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
- Whitney K. Newey & Douglas G. Steigerwald, 1997. "Asymptotic Bias for Quasi-Maximum-Likelihood Estimators in Conditional Heteroskedasticity Models," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 587-600, May.
- J. Bradford De Long & Lawrence H. Summers, 1986. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
- Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(2), pages 307-28, April.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
- Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 31(2), pages 149-163, April.
- Lee, Sang-Won & Hansen, Bruce E., 1994. "Asymptotic Theory for the Garch(1,1) Quasi-Maximum Likelihood Estimator," Econometric Theory, Cambridge University Press, vol. 10(01), pages 29-52, March.
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(1), pages 3-29, September.
- Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
- Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, Elsevier, vol. 2(2), pages 111-120, July.
- Newey, Whitney K., 1988. "Adaptive estimation of regression models via moment restrictions," Journal of Econometrics, Elsevier, Elsevier, vol. 38(3), pages 301-339, July.
- Ruge-Murcia, F.J., 2001.
"Inflation Targeting Under Asymmetric Preferences,"
Cahiers de recherche, Centre interuniversitaire de recherche en Ã©conomie quantitative, CIREQ
2001-04, Centre interuniversitaire de recherche en Ã©conomie quantitative, CIREQ.
- Ruge-Murcia, Francisco J, 2003. " Inflation Targeting under Asymmetric Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 35(5), pages 763-85, October.
- Francisco J. Ruge-Murcia, 2001. "Inflation Targeting Under Asymmetric Preferences," Banco de Espaï¿½a Working Papers 0106, Banco de Espaï¿½a.
- Francisco Javier Ruge-Murcia, 2001. "Inflation Targeting Under Asymmetric Preferences," IMF Working Papers 01/161, International Monetary Fund.
- RUGE-MURCIA, Francisco .J., 2001. "Inflation Targeting Under Asymmetric Preferences," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2001-04, Universite de Montreal, Departement de sciences economiques.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum).
If references are entirely missing, you can add them using this form.