Generalized Variance‐Ratio Tests in the Presence of Statistical Dependence

19 Pages Posted: 28 Jul 2015

See all articles by John C. Nankervis

John C. Nankervis

University of Essex - Department of Accounting, Finance & Management

Periklis Kougoulis

Abu Dhabi University - College of Business Administration

Jerry Coakley

University of Essex - Essex Business School

Date Written: September 2015

Abstract

This article extends and generalizes the variance‐ratio (VR) statistic by employing an estimator of the asymptotic covariance matrix of the sample autocorrelations. The estimator is consistent under the null for general classes of innovations exhibiting statistical dependence including exponential generalized autoregressive conditional heteroskedasticity and non‐martingale difference sequence processes. Monte Carlo experiments show that our generalized test statistics have good finite sample size and superior power properties to other recently developed VR versions. In an application to two major US stock indices, our new generalized VR tests provide stronger rejections of the null than do competing VR tests.

Keywords: Variance‐ratio statistic, non‐MDS process, Monte Carlo

Suggested Citation

Nankervis, John C. and Kougoulis, Periklis and Coakley, Jerry, Generalized Variance‐Ratio Tests in the Presence of Statistical Dependence (September 2015). Journal of Time Series Analysis, Vol. 36, Issue 5, pp. 687-705, 2015, Available at SSRN: https://ssrn.com/abstract=2636578 or http://dx.doi.org/10.1111/jtsa.12124

John C. Nankervis (Contact Author)

University of Essex - Department of Accounting, Finance & Management ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Periklis Kougoulis

Abu Dhabi University - College of Business Administration

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Jerry Coakley

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

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