New Non-Linearity Test to Circumvent the Limitation of Volterra Expansion

Zhidong Bai, Yongchang Hui and Wing-Keung Wong

MPRA Paper from University Library of Munich, Germany

Abstract: In this article we propose a quick, efficient, and easy method to detect whether a time series Yt possesses any nonlinear feature. The advantage of our proposed nonlinearity test is that it is not required to know the exact nonlinear features and the detailed nonlinear forms of Yt. Our proposed test could also be used to test whether the model, including linear and nonlinear, hypothesized to be used for the variable is appropriate as long as the residuals of the model being used could be estimated. Our simulation results show that our proposed test is stable and powerful while our illustration on Wolf's sunspots numbers is consistent with the findings from existing literature.

Keywords: linearity; nonlinearity; U-statistics; Volterra expansion (search for similar items in EconPapers)
JEL-codes: C01 C14 C32 (search for similar items in EconPapers)
Date: 2012-08-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41872

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