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Testing an autoregressive structure in binary time series models

  • Henri Nyberg

    ()

    (University of Helsinki and HECER)

This paper introduces a Lagrange Multiplier (LM) test for testing an autoregressive structure in a binary time series model proposed by Kauppi and Saikkonen (2008). Simulation results indicate that the two versions of the proposed LM test have reasonable size and power properties when the sample size is large. A parametric bootstrap method is suggested to obtain approximately correct sizes also in small samples. The use of the test is illustrated by an application to recession forecasting models using monthly U.S. data.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P135.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1460-1473

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Handle: RePEc:ebl:ecbull:eb-10-00253
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  1. Estrella, Arturo, 1998. "A New Measure of Fit for Equations with Dichotomous Dependent Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 198-205, April.
  2. Tina Hviid Rydberg & Neil Shephard, 2002. "Dynamics of trade-by-trade price movements: decomposition and models," OFRC Working Papers Series 2002fe04, Oxford Financial Research Centre.
  3. Richard Startz, . "Binomial Autoregressive Moving Average Models with an Application to U.S. Recessions," Working Papers UWEC-2006-10-FC, University of Washington, Department of Economics.
  4. Marcellino, Massimiliano & Stock, James H & Watson, Mark W, 2005. "A Comparison of Direct and Iterated Multistep AR Methods for Forecasting Macroeconomic Time Series," CEPR Discussion Papers 4976, C.E.P.R. Discussion Papers.
  5. Marcelle Chauvet & Simon Potter, 2001. "Forecasting recessions using the yield curve," Staff Reports 134, Federal Reserve Bank of New York.
  6. Henri Nyberg, 2010. "Dynamic probit models and financial variables in recession forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 215-230.
  7. Heikki Kauppi, 2008. "Yield-Curve Based Probit Models for Forecasting U.S. Recessions: Stability and Dynamics," Discussion Papers 31, Aboa Centre for Economics.
  8. Bernard, Henri J & Gerlach, Stefan, 1998. "Does the Term Structure Predict Recessions? The International Evidence," CEPR Discussion Papers 1892, C.E.P.R. Discussion Papers.
  9. Russell Davidson & James G. MacKinnon, 1982. "Convenient Specification Tests for Logit and Probit Models," Working Papers 514, Queen's University, Department of Economics.
  10. Leung, Mark T. & Daouk, Hazem & Chen, An-Sing, 2000. "Forecasting stock indices: a comparison of classification and level estimation models," International Journal of Forecasting, Elsevier, vol. 16(2), pages 173-190.
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