A Hybrid Joint Moment Ratio Test for Financial Time Series
1998-09-08
Research Paper
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We advocate the use of absolute moment ratio statistics in conjunction with standard variance ratio statistics in order to disentangle linear dependence, non-linear dependence, and leptokurtosis in financial time series. Both statistics are computed for multiple return horizons simultaneously, and the results are presented in a comprehensive way using a graphical device. We construct a formal joint testing procedure based on bootstrapped and block-bootstrapped uniform confidence intervals. The methodology is hybrid because it combines a formal testing procedure with volatility curve pattern recognition based on expert opinions. An application to forex data illustrates the procedure.
Keywords
- bootstrap
- stable distributions
- absolute returns
- fat-tails
- forex market efficiency
- linear dependence
- volatility clustering
- variance ratios
Classifications using
Journal of Economic Literature (JEL) Classification System
- C14 : Semiparametric and Nonparametric Methods
- F31 : Foreign Exchange
- G14 : Information and Market Efficiency; Event Studies
Automatically Extracted Terms
- ratio
- return
- curve
- moment
- volatility
- moment ratio curves
- distribution
- variance
- confidence
- confidence band
- theorem
- i.i.d
- dependence
- result
- moment ratio curve
- procedure
- bootstrap
- process
- statistic
- horizon
