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Adaptive Rate-Optimal Detection of Small Autocorrelation Coefficients

Author

Listed:
  • Alain Guay
  • Emmanuel Guerre
  • Stepana Lazarova

Abstract

A new test is proposed for the null of absence of serial correlation. The test uses a data-driven smoothing parameter. The resulting test statistic has a standard limit distribution under the null. The smoothing parameter is calibrated to achieve rate-optimality against several classes of alternatives. The test can detect alternatives with many small correlation coefficients that can go to zero with an optimal adaptive rate which is faster than the parametric rate. The adaptive rate-optimality against smooth alternatives of the new test is established as well. The test can also detect ARMA and local Pitman alternatives converging to the null with a rate close or equal to the parametric one. A simulation experiment and an application to monthly financial square returns illustrate the usefulness of the proposed approach.

Suggested Citation

  • Alain Guay & Emmanuel Guerre & Stepana Lazarova, 2009. "Adaptive Rate-Optimal Detection of Small Autocorrelation Coefficients," Cahiers de recherche 0925, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0925
    as

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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2009/CIRPEE09-25.pdf
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    References listed on IDEAS

    as
    1. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
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    More about this item

    Keywords

    Absence of serial correlation; data-driven nonparametric test; adaptive rate-optimality; small alternatives; time series;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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