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A Goodness Of Fit Test For Ergodic Markov Processes

Author

Listed:
  • Vance Martin

    (Department of Economics, The University of Melbourne)

  • Yoshihiko Nishiyama

    (Institute of Economic Research, Kyoto University)

  • John Stachurski

    (Research School of Economics, Australian National University)

Abstract

We introduce a goodness of fit test for ergodic Markov processes. Our test compares the data against the set of stationary densities implied by the class of models specified in the null hypothesis, and rejects if no model in the class yields a stationary density that matches with the data. No alternative needs to be specified in order to implement the test. Although our test compares densities it involves no smoothing parameters, and is powerful against 1√n local alternatives.

Suggested Citation

  • Vance Martin & Yoshihiko Nishiyama & John Stachurski, 2011. "A Goodness Of Fit Test For Ergodic Markov Processes," KIER Working Papers 787, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:787
    as

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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP787.pdf
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    References listed on IDEAS

    as
    1. Rémy Chicheportiche & Jean-Philippe Bouchaud, 2011. "Goodness-of-Fit tests with Dependent Observations," Post-Print hal-00621061, HAL.
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    4. John Stachurski & Vance Martin, 2008. "Computing the Distributions of Economic Models via Simulation," Econometrica, Econometric Society, vol. 76(2), pages 443-450, March.
    5. Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-883, November.
    6. Remy Chicheportiche & Jean-Philippe Bouchaud, 2011. "Goodness-of-Fit tests with Dependent Observations," Papers 1106.3016, arXiv.org, revised Aug 2011.
    7. Chen, Song Xi & Gao, Jiti & Tang, Chenghong, 2005. "A test for model specification of diffusion processes," MPRA Paper 11976, University Library of Munich, Germany, revised Feb 2007.
    8. Pritsker, Matt, 1998. "Nonparametric Density Estimation and Tests of Continuous Time Interest Rate Models," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 449-487.
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    10. Kazuo Nishimura & John Stachurski, 2012. "Stability of Stochastic Optimal Growth Models: A New Approach," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 289-307, Springer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Specification test; goodness of fit; Markov processes.;
    All these keywords.

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