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An Alternative To The Bds Test: Integration Across The Correlation Integral

  • Evzen Kocenda

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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Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 20 (2001)
Issue (Month): 3 ()
Pages: 337-351

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Handle: RePEc:taf:emetrv:v:20:y:2001:i:3:p:337-351
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  1. 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.
  2. Serletis, A. & Gogas, P., 1997. "Chaos in East European Black-Market Exchange Rates," Papers 9708, Calgary - Department of Economics.
  3. 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.
  4. Victor Chwee, 1998. "Chaos in Natural Gas Futures?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 149-164.
  5. repec:att:wimass:9520 is not listed on IDEAS
  6. 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.
  7. Brock, W.A., 1988. "Nonlinearity And Complex Dynamics In Economics And Finance," Working papers 360, Wisconsin Madison - Social Systems.
  8. Evžen Kočenda, 1996. "Volatility of a Seemingly Fixed Exchange Rate," Eastern European Economics, M.E. Sharpe, Inc., vol. 34(6), pages 37-67, December.
  9. Brock, W. A., 1986. "Distinguishing random and deterministic systems: Abridged version," Journal of Economic Theory, Elsevier, vol. 40(1), pages 168-195, October.
  10. 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.
  11. 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.
  12. 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.
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