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Robustness of Power Properties of Non-linearity Tests

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  • Marian Vavra

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Abstract

The paper examines the robustness of the size and power properties of the standard non-linearity tests under different conditions such as moment failure and asymmetry of innovations. Our results reveal the following. First, there seems not to be a direct link between moment condition failure and the power variation of non-linearity tests. Second, the power of the tests is very sensitive to asymmetry of innovations compared to moment condition failure. Third, although we evaluate 9 non-linear time series models using 8 standard non-linearity tests, some non-linear models remain completely undetected.

Suggested Citation

  • Marian Vavra, 2012. "Robustness of Power Properties of Non-linearity Tests," Birkbeck Working Papers in Economics and Finance 1205, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1205
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    File URL: https://eprints.bbk.ac.uk/id/eprint/5954
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    non-linearity testing; Monte Carlo experiments;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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