A Simple Hypothesis Test for Heteroscedasticity

Venier, Guido (2008): A Simple Hypothesis Test for Heteroscedasticity.

Abstract

Abstract: The scope of this paper is the presentation of a simple hypothesis test that enables to discern heteroscedastic data from homoscedastic i.i.d. gaussian white noise. The main feature will be a test statistic that’s easy applicable and serves well in committing such a test. The power of the statistic will be underlined by examples where it is applied to stock market data and time series from deterministic diffusion a chaotic time series process. It will turn out that in those cases the statistic rejects with a high degree of confidence the random walk hypothesis and is therefore highly reliable. Furthermore it will be discussed, that the test in most cases also may serve as a test for independence and heteroscedasticity in general. This will be exemplified by independent and equally distributed random numbers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Heteroscedasticity, Hypothesis Test, Independence, Random Walk
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

References

[1] Guido Venier “A New Model for Stock Price Movements” JAES “Journal of Applied Economic Sciences” http://www.jaes.uv.ro. Volume III Issue2(4) Fall2008

[2] Andrew W. Lo & A. Craig MacKinlay (1987) “Stock Market Prices do not follow Random Walks: evidence from a simple specification Test” Department of Finance, Wharton School, University of Pennsylvania, Philadelphia, PA 19104 USA

[3] Heinz Bauer: Wahrscheinlichkeitstheorie und Grundzüge der Maßtheorie. 4. Auflage. DeGruyter, Berlin 1991