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A non-parametric independence test using permutation entropy

  • Matilla-Garci­a, Mariano
  • Ruiz Mari­n, Manuel

In the present paper we construct a new, simple, consistent and powerful test for independence by using symbolic dynamics and permutation entropy as a measure of serial dependence. We also give a standard asymptotic distribution of an affine transformation of the permutation entropy under the null hypothesis of independence. The test statistic and its standard limit distribution are invariant to any monotonic transformation. The test applies to time series with discrete or continuous distributions. Eventhough the test is based on entropy measures, it avoids smoothed non-parametric estimation. An application to several daily financial time series illustrates our approach.

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File URL: http://www.sciencedirect.com/science/article/B6VC0-4RM7N3M-1/1/403fe1ec8502aa8065c71615a8f918fc
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 144 (2008)
Issue (Month): 1 (May)
Pages: 139-155

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Handle: RePEc:eee:econom:v:144:y:2008:i:1:p:139-155
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  1. Mototsugu Shintani & Oliver Linton, 2003. "Nonparametric neural network estimation of Lyapunov exponents and a direct test for chaos," LSE Research Online Documents on Economics 2097, London School of Economics and Political Science, LSE Library.
  2. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
  3. Harry Joe, 1989. "Estimation of entropy and other functionals of a multivariate density," Annals of the Institute of Statistical Mathematics, Springer, vol. 41(4), pages 683-697, December.
  4. Pinkse, Joris, 1998. "A consistent nonparametric test for serial independence," Journal of Econometrics, Elsevier, vol. 84(2), pages 205-231, June.
  5. Yongmiao Hong & Halbert White, 2005. "Asymptotic Distribution Theory for Nonparametric Entropy Measures of Serial Dependence," Econometrica, Econometric Society, vol. 73(3), pages 837-901, 05.
  6. Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & Julián Andrada-Félix, . "Testing Chaotic Dynamics via Lyapunov Exponents," Working Papers 2000-07, FEDEA.
  7. C. W. Granger & E. Maasoumi & J. Racine, 2004. "A Dependence Metric for Possibly Nonlinear Processes," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(5), pages 649-669, 09.
  8. Robinson, P M, 1991. "Consistent Nonparametric Entropy-Based Testing," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 437-53, May.
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