A Quantilogram Approach to Evaluating Directional Predictability

25 Pages Posted: 10 Jan 2004

See all articles by Oliver B. Linton

Oliver B. Linton

University of Cambridge

Yoon-Jae Whang

Seoul National University - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

In this note we propose a simple method of measuring directional predictability and testing for the hypothesis that a given time series has no directional predictability. The test is based on the correlogram of quantile hits. We provide the distribution theory needed to conduct inference, propose some model free upper bound critical values, and apply our methods to stock index return data. The empirical results suggests some directional predictability in returns especially in mid range quantiles like 5%-10%.

Keywords: Correlogram, Dependence, Efficient Markets, Empirical Process, Portmanteau, Quantiles

JEL Classification: C12, C13, C14, C22

Suggested Citation

Linton, Oliver B. and Whang, Yoon-Jae, A Quantilogram Approach to Evaluating Directional Predictability (March 2004). Cowles Foundation Discussion Paper No. 1454, Available at SSRN: https://ssrn.com/abstract=485342

Oliver B. Linton (Contact Author)

University of Cambridge ( email )

Faculty of Economics
Cambridge, CB3 9DD
United Kingdom

Yoon-Jae Whang

Seoul National University - School of Economics ( email )

San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742
Korea
+82 2 80 6362 (Phone)
+82 2 86 4231 (Fax)

HOME PAGE: http://plaza.snu.ac.kr/~whang

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