Small Sample Properties of Alternative Tests for Martingale Difference Hypothesis

Amélie Charles (1) , Olivier Darné (2) , Jae Kim (3)

1 Audencia Recherche
2 LEMNA - Laboratoire d'économie et de management de Nantes Atlantique
3 La Trobe University

A Monte Carlo experiment is conducted to compare power properties of alternative tests for the martingale difference hypothesis. Overall, we find that the wild bootstrap automatic variance ratio test shows the highest power against linear dependence; while the generalized spectral test performs most desirably under nonlinear dependence.

Mots clés: Monte Carlo experiment; Nonlinear dependence; Portmanteau test; Variance ratio test

Domaines: Econométrie de la finance [q-fin.ST]

Amélie Charles, Olivier Darné, Jae Kim. Small Sample Properties of Alternative Tests for Martingale Difference Hypothesis. Economics Letters, 2011, 110 (2), pp.151-154. ⟨10.1016/j.econlet.2010.11.018⟩. ⟨hal-00771829⟩