A Nonparametric Test for Granger-causality in Distribution with Application to Financial Contagion
This paper introduces a kernel-based nonparametric inferential procedure to test for Granger-causality in distribution. This test is a multivariate extension of the kernel-based Granger-causality test in tail-event introduced by Hong et al. (2009) and hence shares its main advantage, by checking a large number of lags with higher order lags discounted. Besides, our test is highly exible as it can be used to check for Granger-causality in specific regions on the distribution supports, like the center or the tails. We prove that it converges asymptotically to a standard Gaussian distribution under the null hypothesis and thus it is free of parameter estimation uncertainty. Monte Carlo simulations illustrate the excellent small sample size and power properties of the test. This new test is applied for a set of European stock markets in order to analyse the spill-overs during the recent European crisis and to distinguish contagion from interdependence effect.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://economix.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, Mervyn A & Wadhwani, Sushil, 1990.
"Transmission of Volatility between Stock Markets,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(1), pages 5-33.
- Bodart, Vincent & Candelon, Bertrand, 2009.
"Evidence of interdependence and contagion using a frequency domain framework,"
Emerging Markets Review,
Elsevier, vol. 10(2), pages 140-150, June.
- Bodart Vincent & Candelon Bertrand, 2005. "Evidences of Interdependence and Contagion using a Frequency Domain Framework," Research Memorandum 024, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
- Kristin Forbes & Roberto Rigobon, 1999.
"No Contagion, Only Interdependence: Measuring Stock Market Co-movements,"
NBER Working Papers
7267, National Bureau of Economic Research, Inc.
- Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
- Sims, Christopher A, 1980.
"Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered,"
American Economic Review,
American Economic Association, vol. 70(2), pages 250-57, May.
- Christopher A. Sims, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," NBER Working Papers 0430, National Bureau of Economic Research, Inc.
- Su, Liangjun & White, Halbert, 2007.
"A consistent characteristic function-based test for conditional independence,"
Journal of Econometrics,
Elsevier, vol. 141(2), pages 807-834, December.
- Su, Liangjun & White, Halbert, 2003. "A Consistent Characteristic-Function-Based Test for Conditional Independence," University of California at San Diego, Economics Working Paper Series qt4dv0837f, Department of Economics, UC San Diego.
- Candelon, Bertrand & Joëts, Marc & Tokpavi, Sessi, 2013. "Testing for Granger causality in distribution tails: An application to oil markets integration," Economic Modelling, Elsevier, vol. 31(C), pages 276-285.
- Su, Liangjun & White, Halbert, 2008. "A Nonparametric Hellinger Metric Test For Conditional Independence," Econometric Theory, Cambridge University Press, vol. 24(04), pages 829-864, August.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
- Hong, Yongmiao & Liu, Yanhui & Wang, Shouyang, 2009. "Granger causality in risk and detection of extreme risk spillover between financial markets," Journal of Econometrics, Elsevier, vol. 150(2), pages 271-287, June.
- Chafik Bouhaddioui & Roch Roy, 2006. "A Generalized Portmanteau Test For Independence Of Two Infinite-Order Vector Autoregressive Series," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(4), pages 505-544, 07.
- repec:taf:jnlbes:v:30:y:2012:i:2:p:275-287 is not listed on IDEAS
- Angelos Kanas, 2002. "Mean and Variance Causality between Official and Parallel Currency Markets: Evidence from Four Latin American Countries," The Financial Review, Eastern Finance Association, vol. 37(2), pages 137-163, 05.
When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2014-18. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valérie Mignon)
If references are entirely missing, you can add them using this form.