Bicorrelations and Cross-Bicorrelations As Non-linearity Tests and Tools for Exchange Rate Forecasting

Chris Brooks and Melvin Hinich

Journal of Forecasting, 2001, vol. 20, issue 3, 181-96

Abstract: This paper proposes and implements a new methodology for forecasting time series, based on bicorrelations and cross-bicorrelations. It is shown that the forecasting technique arises as a natural extension of, and as a complement to, existing univariate and multivariate non-linearity tests. The formulations are essentially modified autoregressive or vector autoregressive models respectively, which can be estimated using ordinary least squares. The techniques are applied to a set of high-frequency exchange rate returns, and their out-of-sample forecasting performance is compared to that of other time series models. Copyright © 2001 by John Wiley & Sons, Ltd.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:20:y:2001:i:3:p:181-96

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