A Single-Blind Controlled Competition among Tests for Nonlinearity and Chaos
This is the FINAL draft of this paper reporting the results of a long ongoing competition. The paper now is forthcoming in the Journal of Econometrics. This final version replaces the earlier draft that was also in this archive. Interest has been growing in testing for nonlinearity or chaos in economic data, but much controversy has arisen about the available results. This paper explores the reasons for these empirical difficulties. We apply five highly regarded tests for nonlinearity or chaos to ten simulated data series. The data generating mechanisms include linear processes, chaotic recursions, and nonchaotic stochastic processes; and both large and small samples were included in the experiment. The data series were produced in a single blind manner by the competition manager and sent by e-mail, without identifying information, to the experiment participants. Each such participant is an acknowledged expert in one of the tests and has a possible vested interest in producing the best possible results with that one test. The results of this competition provide much surprising information about the power functions of some of the best regarded tests for nonlinearity or noisy chaos. The simulated data and the code for some of the tests entered into this competition also are online in this archive.
|Date of creation:||20 Feb 1996|
|Date of revision:||20 Sep 1996|
|Note:||Type of Document - Microsoft Word; prepared on Macintosh; to print on PostScript; pages: 49 ; 2 figures: included. The simulated data used in this competition is online in this archive at URL location:|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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- Serletis, Apostolos, 1995. "Random Walks, Breaking Trend Functions, and the Chaotic Structure of the Velocity of Money," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 453-458, October.
- DeCoster, Gregory P & Mitchell, Douglas W, 1991. "Nonlinear Monetary Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 455-461, October.
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- Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-1764, December.
- Brock, W. & Lakonishok, J. & Lebaron, B., 1991. "Simple Technical Trading Rules And The Stochastic Properties Of Stock Returns," Working papers 90-22, Wisconsin Madison - Social Systems.
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