A non-parametric independence test using permutation entropy

Matilla-Garci­a, Mariano and Ruiz Mari­n, Manuel
Authors registered in the RePEc Author Service: Manuel Ruiz Marin, Sr. and Mariano Matilla-García

Journal of Econometrics, 2008, vol. 144, issue 1, 139-155

Abstract: In the present paper we construct a new, simple, consistent and powerful test for independence by using symbolic dynamics and permutation entropy as a measure of serial dependence. We also give a standard asymptotic distribution of an affine transformation of the permutation entropy under the null hypothesis of independence. The test statistic and its standard limit distribution are invariant to any monotonic transformation. The test applies to time series with discrete or continuous distributions. Eventhough the test is based on entropy measures, it avoids smoothed non-parametric estimation. An application to several daily financial time series illustrates our approach.

Date: 2008
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:144:y:2008:i:1:p:139-155

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