The Use of Trimming to Improve the Performance of Tests for Nonlinear Serial Dependence with Application to the Australian National Electricity Market
In this article, we build on the results reported in Wild, Hinich and Foster (2008) for the National Electricity Market (NEM) of Australia by testing for episodic nonlinearity in the dynamics governing weekly cycles in spot price time series data. We apply the portmanteau correlation, bicorrelation and tricorrelation tests introduced in Hinich (1996) and the Engle (1982) ARCH LM test to the time series of half hourly spot prices from 7/12/1998 to 29/02/2008. We use trimming to improve the finite sample performance of the various test statistics mentioned above given the presence of significant skewness and leptokurtosis in the source datasets which may adversely affect the convergence properties of the test statistics in finite samples. With trimming, we still find the presence of significant third and fourth order (non-linear) serial dependence in the weekly spot price data, pointing to the presence of ‘deep’ nonlinear structure in this data.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: St. Lucia, Qld. 4072|
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
More information through EDIRC
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.:
- John Foster & Melvin J. Hinich & Phillip Wild, 2008.
"Randomly Modulated Periodic Signals in Australias National Electricity Market,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 3), pages 105-130.
- John Foster & Melvin Hinich & Phillip Wild, 2008. "Randomly Modulated Periodic Signals in Australias National Electricity Market," Energy Economics and Management Group Working Papers 2-2008, School of Economics, University of Queensland, Australia.
- repec:ebl:ecbull:v:7:y:2005:i:1:p:1-6 is not listed on IDEAS
- Hinich, Melvin A. & Wild, Phillip, 2001. "Testing Time-Series Stationarity Against An Alternative Whose Mean Is Periodic," Macroeconomic Dynamics, Cambridge University Press, vol. 5(03), pages 380-412, June.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Ammermann, Peter A. & Patterson, Douglas M., 2003. "The cross-sectional and cross-temporal universality of nonlinear serial dependencies: Evidence from world stock indices and the Taiwan Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 11(2), pages 175-195, April.
- repec:ebl:ecbull:v:7:y:2005:i:6:p:1-5 is not listed on IDEAS
- Hinich, Melvin J. & Serletis, Apostolos, 2007. "Episodic Nonlinear Event Detection in the Canadian Exchange Rate," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 68-74, March.
- Claudio Bonilla & Rafael Romero-Meza & Melvin Hinich, 2007. "GARCH inadequacy for modelling exchange rates: empirical evidence from Latin America," Applied Economics, Taylor & Francis Journals, vol. 39(19), pages 2529-2533.
- Kian-Ping Lim & Melvin J. Hinich & Venus Khim-Sen Liew, 2005. "Statistical Inadequacy of GARCH Models for Asian Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 4(3), pages 263-279, December.
When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:367. 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: (SOE IT)
If references are entirely missing, you can add them using this form.