A nonparametric approach to test for predictability

Zhiyuan Pan, Yudong Wang and Chongfeng Wu

Economics Letters, 2016, vol. 148, issue C, 10-16

Abstract: Predictability of macroeconomic and financial variables is an important issue in economics. In this paper, we propose a nonparametric test for the predictability of the direction of price changes. The Monte Carlo simulation results show that our method displays better finite-sample property than the traditional parametric Granger causality test~(Granger, 1969) and two nonparametric causality tests of~Hiemstra and Jones (1994) and Diks and Panchenko (2006).

Keywords: Nonparametric test; Predictability; Size; Power (search for similar items in EconPapers)
JEL-codes: C12 G17 Q47 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:148:y:2016:i:c:p:10-16

DOI: 10.1016/j.econlet.2016.09.006

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