Robustness of Power Properties of Non-linearity Tests

Marian Vavra ()

No 1205, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: The paper examines the robustness of the size and power properties of the standard non-linearity tests under different conditions such as moment failure and asymmetry of innovations. Our results reveal the following. First, there seems not to be a direct link between moment condition failure and the power variation of non-linearity tests. Second, the power of the tests is very sensitive to asymmetry of innovations compared to moment condition failure. Third, although we evaluate 9 non-linear time series models using 8 standard non-linearity tests, some non-linear models remain completely undetected.

Keywords: non-linearity testing; Monte Carlo experiments (search for similar items in EconPapers)
JEL-codes: C15 C22 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-ecm and nep-ets
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https://eprints.bbk.ac.uk/id/eprint/5954 First version, 2012 (application/pdf)

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