A MAX-CORRELATION WHITE NOISE TEST FOR WEAKLY DEPENDENT TIME SERIES

Jonathan B. Hill and Kaiji Motegi

Econometric Theory, 2020, vol. 36, issue 5, 907-960

Abstract: This article presents a bootstrapped p-value white noise test based on the maximum correlation, for a time series that may be weakly dependent under the null hypothesis. The time series may be prefiltered residuals. The test statistic is a normalized weighted maximum sample correlation coefficient $ \max _{1\leq h\leq \mathcal {L}_{n}}\sqrt {n}|\hat {\omega }_{n}(h)\hat {\rho }_{n}(h)|$, where $\hat {\omega }_{n}(h)$ are weights and the maximum lag $ \mathcal {L}_{n}$ increases at a rate slower than the sample size n. We only require uncorrelatedness under the null hypothesis, along with a moment contraction dependence property that includes mixing and nonmixing sequences. We show Shao’s (2011, Annals of Statistics 35, 1773–1801) dependent wild bootstrap is valid for a much larger class of processes than originally considered. It is also valid for residuals from a general class of parametric models as long as the bootstrap is applied to a first-order expansion of the sample correlation. We prove the bootstrap is asymptotically valid without exploiting extreme value theory (standard in the literature) or recent Gaussian approximation theory. Finally, we extend Escanciano and Lobato’s (2009, Journal of Econometrics 151, 140–149) automatic maximum lag selection to our setting with an unbounded lag set that ensures a consistent white noise test, and find it works extremely well in controlled experiments.

Date: 2020
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