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A powerful portmanteau test of lack of fit for time series

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  • Peña, Daniel
  • Rodríguez, Julio

Abstract

A new portmanteau test for time series more powerful than the tests ofLjung and Box (1978) and Monti (1994} is proposed. The test is based on the pth root of the determinant of the pth autocorrelation matrix. It is shown that this statistic can be interpreted as the geometric mean of the squared multiple correlation coefficients with m lag values when m goes from 1 to p. It can also be interpreted as a geometric mean of the partial autocorrelation coefficients. The asymptotic distribution of the test statistic is obtained. This distribution is a linear combination of chi-squared distributions and it is shown that it can be approximated by a gamma distribution. The power of the test is compared with that of the Ljung and Box and Monti tests and it is shown that the proposed test can be up to 50% more powerful depending upon the model and sample size. The test is applied to the detection of nonlinearity by using the same matrix but with coefficients that are now the autocorrelations of the squared residuals. The new test is more powerful than the test of McLeod and Li (1983) for nonlinearity. An example is presented in which this test detects nonlinearity in the residuals of the sunpot series.

Suggested Citation

  • Peña, Daniel & Rodríguez, Julio, 2000. "A powerful portmanteau test of lack of fit for time series," DES - Working Papers. Statistics and Econometrics. WS 10133, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:10133
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    1. A. I. McLeod & W. K. Li, 1983. "Diagnostic Checking Arma Time Series Models Using Squared‐Residual Autocorrelations," Journal of Time Series Analysis, Wiley Blackwell, vol. 4(4), pages 269-273, July.
    2. Maravall, Agustin, 1983. "An Application of Nonlinear Time Series Forecasting," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(1), pages 66-74, January.
    3. Scott D. Watkins & Patrick L. Anderson, 2007. "Introduction," Palgrave Macmillan Books, in: Scott D. Watkins & Patrick L. Anderson (ed.), The State Economic Handbook 2008 Edition, pages 1-3, Palgrave Macmillan.
    4. Santiago Velilla, 1994. "A Goodness‐Of‐Fit Test For Autoregressive Moving‐Average Models Based On The Standardized Sample Spectral Distribution Of The Residuals," Journal of Time Series Analysis, Wiley Blackwell, vol. 15(6), pages 637-647, November.
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