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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26612
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| Title: | On the Asymptotic Power of the Variance Ratio Test |
| Authors: | Deo, Rohit S.
Richardson, Matthew |
| Issue Date: | 2001 |
| Series/Report no.: | FIN-01-059 |
| Abstract: | The variance ratio test statistic, which is based on k-period
differences of the data, is commonly used in empirical finance and
economics to test the random walk hypothesis. We obtain the asymptotic
power function of the variance ratio test statistic when the
differencing period k is increasing with the sample size n such that k/n
→ δ > 0. We show that the test is inconsistent against a
variety of mean reverting alternatives, confirm the result in
simulations, and then characterise the functional form of the asymptotic
power in terms of δ and these alternatives. |
| URI: | http://hdl.handle.net/2451/26612 |
| Appears in Collections: | Economics Working Papers
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