Testing for Nonlinearity in Mean in the Presence of Heteroskedasticity

Stan Hurn and Ralf Becker
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Ralf Becker: School of Economics and Finance, Queensland University of Technology, Brisbane, 4001

Economic Analysis and Policy, 2009, vol. 39, issue 2, 311-326

Abstract: This paper considers an important practical problem in testing time-series data for nonlinearity in mean, namely, the distortion in the size of the test encountered if the the data are heteroskedastic. It is shown that using a heteroskedastic consistent auxiliary regression together with the wild bootstrap is an e®ective way of dealing with the problem. Simulation results indicate that signi¯cant improvements in empirical size are obtained, particularly in small samples.

Keywords: nonlinearity in mean; heteroskedasticity; wild bootstrap; empirical size and power (search for similar items in EconPapers)
JEL-codes: C12 C22 C52 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Testing for nonlinearity in mean in the presence of heteroskedasticity (2006)
Working Paper: Testing for Nonlinearity in Mean in the Presence of Heteroskedasticity (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v39:y:2009:i:2:p:311-326

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