On testing for non-linear and time irreversible probabilistic structure in high frequency ASX financial time series data
In this paper, we present three nonparametric trispectrum tests that can establish whether the spectral decomposition of kurtosis of high frequency financial asset price time series is consistent with the assumptions of Gaussianity, linearity and time reversiblility. The detection of nonlinear and time irreversible probabilistic structure has important implications for the choice and implementation of a range of models of the evolution of asset prices, including Black-Sholes-Merton (BSM) option pricing model, ARCH/GARCH and stochastic volatility models. We apply the tests to a selection of high frequency Australian (ASX) stocks.
|Date of creation:||2012|
|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.:
- Melvin J. Hinich & Philip Rothman, .
"A Frequency Domain Test of Time Reversibility,"
9706, East Carolina University, Department of Economics.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Andrew W. Lo & A. Craig MacKinlay, 1987.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Hinich, Melvin J & Patterson, Douglas M, 1985. "Evidence of Nonlinearity in Daily Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 69-77, January.
- Loretan, Mico & Phillips, Peter C. B., 1994.
"Testing the covariance stationarity of heavy-tailed time series: An overview of the theory with applications to several financial datasets,"
Journal of Empirical Finance,
Elsevier, vol. 1(2), pages 211-248, January.
- Loretan, M. & Phillips, P.C.B., 1992. "Testing the Covariance Stationarity of Heavy-Tailed Time Series: An Overview of the Theory with Applications to Several Financial Datasets," Working papers 9208, Wisconsin Madison - Social Systems.
- William A. Barnett & A. Ronald Gallant & Melvin J. Hinich & Jochen A. Jungeilges & Daniel T. Kaplan & Mark J. Jensen, 1996.
"A Single-Blind Controlled Competition among Tests for Nonlinearity and Chaos,"
9602005, EconWPA, revised 20 Sep 1996.
- Barnett, William A. & Gallant, A. Ronald & Hinich, Melvin J. & Jungeilges, Jochen A. & Kaplan, Daniel T. & Jensen, Mark J., 1997. "A single-blind controlled competition among tests for nonlinearity and chaos," Journal of Econometrics, Elsevier, vol. 82(1), pages 157-192.
- William Barnett & A. Ronald Gallant & Melvin J. Hinich & Jochen A. Jungeilges & Daniel T. Kaplan & Mark J. Jensen, 2012. "A Single-Blind Controlled Competition Among Tests For Nonlinearity And Chaos," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201219, University of Kansas, Department of Economics, revised Sep 2012.
- Ramsey, J.B. & Rothman, P., 1993.
"Time Irreversibility and Business Cycle Asymmetry,"
93-39, C.V. Starr Center for Applied Economics, New York University.
- Merton, Robert C., 1975.
"Option pricing when underlying stock returns are discontinuous,"
787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
- Dennis W. Jansen & Casper de Vries, 1988.
"On the frequency of large stock returns: putting booms and busts into perspective,"
1989-006, Federal Reserve Bank of St. Louis.
- Jansen, Dennis W & de Vries, Casper G, 1991. "On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 18-24, February.
- Chen, Yi-Ting & Chou, Ray Y. & Kuan, Chung-Ming, 2000. "Testing time reversibility without moment restrictions," Journal of Econometrics, Elsevier, vol. 95(1), pages 199-218, March.
- Kung-Sik Chan & Lop-Hing Ho & Howell Tong, 2006. "A note on time-reversibility of multivariate linear processes," Biometrika, Biometrika Trust, vol. 93(1), pages 221-227, March.
- de Lima, Pedro J. F., 1997. "On the robustness of nonlinearity tests to moment condition failure," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 251-280.
- Marc Hallin & Claude Lefèvre & Madan Lal Puri, 1988. "On time-reversibility and the uniqueness of moving average representations for non-Gaussian stationary time series," ULB Institutional Repository 2013/2017, ULB -- Universite Libre de Bruxelles.
When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:466. 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.