Testing for Asymmetric Comovements

O‐Chia Chuang, Xiaojun Song and Abderrahim Taamouti

Oxford Bulletin of Economics and Statistics, 2022, vol. 84, issue 5, 1153-1180

Abstract: This paper aims to provide non‐parametric tests for asymmetric comovements between random variables. We consider the popular Cramér‐von Mises and Kolmogorov–Smirnov test statistics based on the distance between positive and negative joint conditional exceedance distribution functions. These tests can capture both linear and nonlinear dependence in the data and do not require selecting kernel functions and bandwidths. We derive the asymptotic distributions of the tests and establish the validity of a block multiplier‐type bootstrap that one can use in finite‐sample settings. We also show that these tests are consistent for any fixed alternative and have non‐trivial power for detecting local alternatives converging to the null at the parametric rate. Monte Carlo simulations and a real financial data analysis illustrate satisfactory performance of the proposed tests.

Date: 2022
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