New variance ratio tests to identify random walk from the general mean reversion model

Kin Lam, May Chun Mei Wong, Wing Keung WONG

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

We develop some properties on the autocorrelation of the k-period returns for the general mean reversion (GMR) process in which the stationary component is not restricted to the AR(1) process but takes the form of a general ARMA process. We then derive some properties of the GMR process and three new nonparametric tests comparing the relative variability of returns over different horizons to validate the GMR process as an alternative to random walk. We further examine the asymptotic properties of these tests which can then be applied to identify random walk models from the GMR processes.

Original languageEnglish
Article number12314
JournalJournal of Applied Mathematics and Decision Sciences
Volume2006
DOIs
Publication statusPublished - 2006

Scopus Subject Areas

  • Decision Sciences(all)
  • Statistics and Probability
  • Computational Mathematics
  • Applied Mathematics

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