On testing for nonlinearity in multivariate time series |
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Authors: | Zacharias Psaradakis,Mariá n Vá vra |
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Affiliation: | 1. Department of Economics, Mathematics and Statistics, Birkbeck, University of London, United Kingdom;2. Research Department, National Bank of Slovakia, Slovakia |
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Abstract: | This paper considers a multivariate extension of the test for neglected nonlinearity proposed by Tsay (1986) that uses principal components to overcome the problem of dimensionality that is common with tests of this type. Monte Carlo experiments reveal that the modified multivariate test provides a significant dimensional reduction without suffering from any systematic level distortion or power loss, and is more powerful than univariate nonlinearity tests. |
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Keywords: | C12 C15 C32 |
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