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An Alternative to the BDS Test: Integration Across The Correlation Integral

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  • Evzen Kocenda

    (CERGE-EI)

Abstract

This paper extends and generalizes the BDS test presented by Brock, Dechert, Scheinkman, and LeBaron (1996). In doing so it aims to remove the limitation of having to arbitrarily select a proximity parameter by integrating across the correlation integral. The Monte Carlo simulation is used to tabulate critical values of the alternative statistic. Previously published empirical studies are replicated as well as power tests executed in order to evaluate the relative performance of the suggested alternative to the BDS test. The results are favorable for the suggested alternative.

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File URL: http://128.118.178.162/eps/em/papers/0301/0301004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0301004.

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Length: 16 pages
Date of creation: 29 Jan 2003
Date of revision:
Handle: RePEc:wpa:wuwpem:0301004

Note: Type of Document - Pdf; prepared on PC; to print on HP LaserJet; pages: 16 ; figures: included
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Web page: http://128.118.178.162

Related research

Keywords: chaos; nonlinear dynamics; correlation integral; Monte Carlo; exchange rates;

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  1. de Lima, Pedro J F, 1998. "Nonlinearities and Nonstationarities in Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 227-36, April.
  2. Victor Chwee, 1998. "Chaos in Natural Gas Futures?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 149-164.
  3. Brock, W.A., 1988. "Nonlinearity And Complex Dynamics In Economics And Finance," Working papers 360, Wisconsin Madison - Social Systems.
  4. Evžen Kočenda, 1996. "Volatility of a Seemingly Fixed Exchange Rate," Eastern European Economics, M.E. Sharpe, Inc., vol. 34(6), pages 37-67, December.
  5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  6. Hsieh, David A, 1991. " Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-77, December.
  7. Brock, W. A., 1986. "Distinguishing random and deterministic systems: Abridged version," Journal of Economic Theory, Elsevier, vol. 40(1), pages 168-195, October.
  8. Serletis, Apostolos & Gogas, Periklis, 1997. "Chaos in East European black market exchange rates," Research in Economics, Elsevier, vol. 51(4), pages 359-385, December.
  9. repec:att:wimass:9520 is not listed on IDEAS
  10. Ignacio Olmeda & Joaquin Pérez, 1995. "Non-linear dynamics and chaos in the Spanish stock market," Investigaciones Economicas, Fundación SEPI, vol. 19(2), pages 217-248, May.
  11. Aydin Cecen, A. & Erkal, Cahit, 1996. "Distinguishing between stochastic and deterministic behavior in foreign exchange rate returns: Further evidence," Economics Letters, Elsevier, vol. 51(3), pages 323-329, June.
  12. Hsieh, David A., 1993. "Implications of Nonlinear Dynamics for Financial Risk Management," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(01), pages 41-64, March.
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Cited by:
  1. Marcos Álvarez-Díaz & Shawkat Hammoudeh & Rangan Gupta, 2013. "Detecting Predictable Non-linear Dynamics in Dow Jones Industrial Average and Dow Jones Islamic Market Indices using Nonparametric Regressions," Working Papers 201385, University of Pretoria, Department of Economics.

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