An Out-of-Sample Test for Nonlinearity in Financial Time Series: An Empirical Application

Theodore Panagiotidis

Working Paper series from Rimini Centre for Economic Analysis

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: 2010-01
New Economics Papers: this item is included in nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.rcea.org/RePEc/pdf/wp20_10.pdf

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)
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:rim:rimwps:20_10

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli ().