A small-sample overlapping variance-ratio test
The null distribution of the overlapping variance-ratio (OVR) test of the random-walk hypothesis is known to be downward biased and skewed to the right in small samples. As shown by Lo and MacKinlay (1989), the test under-rejects the null on the left tail seriously when the sample size is small. This property adversely affects the applicability of the OVR test to macroeconomic time series, which usually have rather small samples. In this paper, we propose a modified overlapping variance-ratio statistic and derive its exact mean under the normality assumption. We propose to approximate the small-sample distribution of the modified statistic using a beta distribution that matches the (exact) mean and the (asymptotic) variance. A Monte Carlo experiment shows that the beta approximation performs well in small samples. Copyright 2004 Blackwell Publishing Ltd.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 25 (2004)
Issue (Month): 1 (01)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0143-9782|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0143-9782|
When requesting a correction, please mention this item's handle: RePEc:bla:jtsera:v:25:y:2004:i:1:p:127-135. See general 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.