Detecting Serial Dependence in Tail Events
AbstractA test for serial independence is proposed which is related to the BDS test but focuses on tail event probabilities rather than probabilities near the center of the distribution. The motivation behind this approach is to obtain a test more suitable for detecting structure in the tails, such as remaining ARCH or GARCH type structure in standardized residuals of financial time series. The new test can be implemented easily by slight modification of the standard BDS test, and is also suitable for model identification. The BDS test and the modified version are compared numerically. To enable fair power comparisons, both tests are implemented as exact level Monte Carlo tests, enabling power calculations of the tests at identical actual sizes. The Monte Carlo implementation allows the use of test statistics which are considerably simpler than for the standard BDS test. For all nonlinear stochastic time series models examined the power of the new test is found to be uniformly larger over all practically reasonable values of the bandwidth parameter. The test is illustrated with an empirical application.
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 Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-079/1.
Date of creation: 06 Aug 2002
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
Nonparametric tests; Serial dependence; Correlation integral; Monte Carlo tests; Volatility clustering.;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-12-02 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.