EconPapers    
Economics at your fingertips  
 

A Consistent Characteristic-Function-Based Test for Conditional Independence

Liangjun Su and Halbert White

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: This paper proposes a nonparametric test of conditional independence based on the notion that two conditional distributions are equal if and only if the corresponding conditional characteristic functions are equal. We use the functional delta method to expand the test statistic around the population truth and establish asymptotic normality under $\beta -$mixing conditions. We show that the test is consistent and has power against local alternatives at distance $n^{-1/2}h_{1}^{-(d_{1}+d_{3})/4}.$ The cases for which not all random variables of interest are\ continuously valued or observable are also treated, and we show that the test is nuisance-parameter free. Simulation results suggest that the test has better finite sample performance than the Hellinger metric test of Su and White (2002) in detecting nonlinear Granger causality in the mean. Applications to exchange rates and to stock prices and trading volumes indicate that our test can reveal some interesting nonlinear causal relations that the traditional linear Granger causality test fails to detect.

Keywords: mixing; conditional characteristic function; Granger non-causality; non-parametric regression (search for similar items in EconPapers)
Date: 2003-08-01
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.escholarship.org/uc/item/4dv0837f.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: A consistent characteristic function-based test for conditional independence (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsdec:qt4dv0837f

Access Statistics for this paper

More papers in University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().

 
Page updated 2020-07-12
Handle: RePEc:cdl:ucsdec:qt4dv0837f