Andria C. Evripidou
Testing for Co-explosive Behaviour in Financial Time Series
Evripidou, Andria C.; Harvey, David I.; Leybourne, Stephen J.; Sollis, Robert
Authors
DAVID HARVEY dave.harvey@nottingham.ac.uk
Professor of Econometrics
STEVE LEYBOURNE steve.leybourne@nottingham.ac.uk
Professor of Econometrics
Robert Sollis
Abstract
This article proposes a test to determine if two price series that each contain an explosive autoregressive regime consistent with the presence of a bubble are related in the sense that a linear combination of them is integrated of order zero. We refer to such a phenomenon as ‘co-explosive behaviour’, and propose a test based on a stationarity testing framework. The test allows the explosive episode in one series to lead (or lag) that in the other by a number of time periods. We establish the asymptotic properties of the test statistic and propose a wild bootstrap procedure for obtaining critical values that are robust to heteroskedasticity. Simulations show that the proposed test has good finite sample size and power performance. An empirical application to detect whether co-explosive behaviour exists among a set of precious and non-ferrous metals is presented.
Citation
Evripidou, A. C., Harvey, D. I., Leybourne, S. J., & Sollis, R. (2022). Testing for Co-explosive Behaviour in Financial Time Series. Oxford Bulletin of Economics and Statistics, 84(3), 624-650. https://doi.org/10.1111/obes.12487
Journal Article Type | Article |
---|---|
Acceptance Date | Jan 11, 2022 |
Online Publication Date | Mar 9, 2022 |
Publication Date | 2022-06 |
Deposit Date | Feb 11, 2022 |
Publicly Available Date | Mar 9, 2022 |
Journal | Oxford Bulletin of Economics and Statistics |
Print ISSN | 0305-9049 |
Electronic ISSN | 1468-0084 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 84 |
Issue | 3 |
Pages | 624-650 |
DOI | https://doi.org/10.1111/obes.12487 |
Keywords | Statistics, Probability and Uncertainty; Economics and Econometrics; Social Sciences (miscellaneous); Statistics and Probability |
Public URL | https://nottingham-repository.worktribe.com/output/7416699 |
Publisher URL | https://onlinelibrary.wiley.com/doi/10.1111/obes.12487?af=R |
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Publisher Licence URL
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