An out-of-sample test for nonlinearity in financial time series: An empirical application

Theodore Panagiotidis

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This paper employs a local information, nearest neighbour forecasting methodology to test for evidence of nonlinearity in financial time series. Evidence from well-known data generating process are provided and compared with returns from the Athens stock exchange given the in-sample evidence of nonlinear dynamics that has appeared in the literature. Nearest neighbour forecasts fail to produce more accurate forecasts from a simple AR model. This does not substantiate the presence of in-sample nonlinearity in the series.

Keywords: nearest neighbour; nonlinearity (search for similar items in EconPapers)
JEL-codes: C22 C53 G10 (search for similar items in EconPapers)
Date: 2010-06, Revised 2010-06
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: An Out-of-Sample Test for Nonlinearity in Financial Time Series: An Empirical Application (2010)
Working Paper: An Out-of-Sample Test for Nonlinearity in Financial Time Series: An Empirical Application (2010)
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