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Using discrete-time techniques to test continuous-time models for nonlinearity in drift

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  • Becker, R.
  • Hurn, A.S.

Abstract

This paper examines whether or not a discrete-time econometric test for nonlinearity in mean may be used in cases where the data are believed to be generated in continuous time. It is demonstrated that appropriate bootstrapping techniques are required to yield a test statistic with sensible statistical properties. The technique is demonstrated by using it to examine 7-day Eurodollar rates for nonlinearity in mean.

Suggested Citation

  • Becker, R. & Hurn, A.S., 2004. "Using discrete-time techniques to test continuous-time models for nonlinearity in drift," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 64(1), pages 121-131.
    • Handle: RePEc:eee:matcom:v:64:y:2004:i:1:p:121-131
    DOI: 10.1016/j.matcom.2003.07.001
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    References listed on IDEAS

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