Revisiting the Hiemstra-Jones Test

13 Pages Posted: 25 Oct 2016 Last revised: 3 Nov 2016

See all articles by Zhidong Bai

Zhidong Bai

Northeast Normal University

Yongchang Hui

Hong Kong Baptist University (HKBU)

Wing-Keung Wong

Asia University, Department of Finance

Date Written: October 22, 2016

Abstract

The famous Hiemstra-Jones test (HJ test) developed by Hiemstra and Jones plays a significant role in studying nonlinear causality. In the last two decades there are numerous applications and theoretical extensions based on this pioneering work. However, several works pointed out that counter-intuitive results are obtained from the HJ test and some researchers found that the HJ test is seriously over rejecting through simulation study. In this paper, we re-investigate HJ’s creative work in 1994 and found that their proposed estimators of the probabilities over different time intervals were not consistent to the target ones proposed in their criterion. To test the HJ’s novel hypothesis on Granger causality, we shall propose new estimators of the probabilities defined in HJ’s paper and reestablish the asymptotic properties which will induce new tests similar to HJ’s ones. Some simulation work will also be presented to support our new findings.

Keywords: Hiemstra-Jones test, Nonlinear Granger Causality

JEL Classification: C01, C12, G10

Suggested Citation

Bai, Zhidong and Hui, Yongchang and Wong, Wing-Keung, Revisiting the Hiemstra-Jones Test (October 22, 2016). Available at SSRN: https://ssrn.com/abstract=2857577 or http://dx.doi.org/10.2139/ssrn.2857577

Zhidong Bai

Northeast Normal University ( email )

Changchun
China

Yongchang Hui

Hong Kong Baptist University (HKBU) ( email )

Kowloon
Hong Kong

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

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