A Test for Iid Residuals Based on Integrating Over the Correlation Integral

CERGE-EI Working Paper Series No. 101

23 Pages Posted: 29 Jan 2010

See all articles by Evžen Kočenda

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Date Written: September 1, 1996

Abstract

This paper presents a new method of testing for IID. The test is suggested as an alternative to the nonparametric BDS test, which requires a proximity parameter (and an embedding dimension m to be chosen arbitrarily. A limited statistical theory exists to determine the right choice of these parameters. The presented method aims to eliminate such indecisiveness by integration over the correlation integral. The Monte Carlo simulation is used to tabulate critical values of the new statistic. In a comparative analysis the presented test is able to find nonlinear dependencies in cases where the BDS test does not find them. The test becomes more critical to the question whether the data is true white noise.

Keywords: Chaos, Nonlinear Dynamics, Correlation integral, Monte Carlo, Exchange Rates, ARCH

JEL Classification: C14, C15, F31

Suggested Citation

Kocenda, Evzen, A Test for Iid Residuals Based on Integrating Over the Correlation Integral (September 1, 1996). CERGE-EI Working Paper Series No. 101, Available at SSRN: https://ssrn.com/abstract=1543758 or http://dx.doi.org/10.2139/ssrn.1543758

Evzen Kocenda (Contact Author)

Charles University in Prague - Institute of Economic Studies ( email )

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HOME PAGE: http://kocenda.fsv.cuni.cz

Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

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CESifo

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University of Regensburg - Institute for East and Southeast European Studies

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University of Michigan at Ann Arbor - The William Davidson Institute

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