Testing for non-linear and time irreversible probabilistic structure in high frequency financial time series data

Wild, Phillip, Foster, John and Hinich, Melvin. J. (2013) Testing for non-linear and time irreversible probabilistic structure in high frequency financial time series data. Journal of The Royal Statistical Society Series A: Statistics In Society, 177 3: 643-659. doi:10.1111/rssa.12037

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Author Wild, Phillip
Foster, John
Hinich, Melvin. J.
Title Testing for non-linear and time irreversible probabilistic structure in high frequency financial time series data
Journal name Journal of The Royal Statistical Society Series A: Statistics In Society   Check publisher's open access policy
ISSN 0964-1998
1467-985X
Publication date 2013-10-30
Year available 2013
Sub-type Article (original research)
DOI 10.1111/rssa.12037
Volume 177
Issue 3
Start page 643
End page 659
Total pages 17
Place of publication Chichester, West Sussex, United Kingdom
Publisher Wiley-Blackwell Publishing
Collection year 2014
Language eng
Formatted abstract
We present three non-parametric trispectrum tests that can establish whether the spectral decomposition of kurtosis of high frequency financial asset price time series is consistent with the assumptions of Gaussianity, linearity and time reversiblility. The detection of non-linear and time irreversible probabilistic structure has important implications for the choice and implementation of a range of models of the evolution of asset prices, including Black–Scholes–Merton option pricing model, auto-regressive conditional heteroscedastic or generalized auto-regressive conditional heteroscedastic and stochastic volatility models. We apply the tests to a selection of high frequency Australian stocks.
Keyword Bonferroni test
Gaussianity
Linearity
Time reversibility
Trispectrum
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Article first published online: 30 OCT 2013

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
School of Economics Publications
 
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Created: Fri, 17 Jan 2014, 23:39:28 EST by Alys Hohnen on behalf of School of Economics