Some Bootstrap Tests for Non-linearity and Long Memory in Financial Time Series

Rodney C Wolff and Adrian G Barnett

No 350, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: Understanding and forecasting financial time series depend crucially on identifying any non-linearity which may be present. Recent developments in tests for non-linearity very commonly display low power, most likely because of over-smoothing and discarding pertinent information. In this presentation, we present some bootstrap tests for non-linearity in a time series, and explain how it can assist in identifying the form of non-linearity. Our methods are based on higher-order moments of the time series of interest, and its bispectrum, being the Fourier transform of the third-order moment. As a by-product of the proposed tests, we identify signature behaviour of long memory, and discuss this observation particularly in the context of high-frequency econometric measurements.

Keywords: Bispectrum; Bootstrap tests; Higher-order moments; Non-linearity; Time series. (search for similar items in EconPapers)
JEL-codes: C12 C14 C22 C63 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:350

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