A note on the Hiemstra-Jones test for Granger non-causality
We address a consistency problem in the commonly used nonparametric test for Granger causality developed by Hiemstra and Jones (1994). We show that the relationship tested is not implied by the null hypothesis of Granger non-causality. Monte Carlo simulations using processes satisfying the null hypothesis show that, for a given nominal size, the actual rejection rate may tend to one as the sample size increases. Our results imply that evidence for nonlinear Granger causality reported in the applied empirical literature should be re-interpreted.
|Date of creation:||2004|
|Contact details of provider:|| Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands|
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- Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2002. "Relationships between Australian Real Estate and Stock Market Prices--A Case of Market Inefficiency," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 21(3), pages 181-192, April.
- Brooks, Chris & Henry, Olan T., 2000.
"Linear and non-linear transmission of equity return volatility: evidence from the US, Japan and Australia,"
Elsevier, vol. 17(4), pages 497-513, December.
- Brooks, C. & Henry, O.T., 1999. "Linear and Non-Linear Transmission of Equity Return Volatility: Evidence From the US, Japan, and Australia," Department of Economics - Working Papers Series 676, The University of Melbourne.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
- Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-1664, December.
- Abhay Abhyankar, 1998. "Linear and nonlinear Granger causality: Evidence from the U.K. stock index futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 18(5), pages 519-540, August.
- Asimakopoulos, Ioannis & Ayling, David & Mansor Mahmood, Wan, 2000. "Non-linear Granger causality in the currency futures returns," Economics Letters, Elsevier, vol. 68(1), pages 25-30, July. Full references (including those not matched with items on IDEAS)
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