Bicorrelations and cross-bicorrelations as non-linearity tests and tools for exchange rate forecasting
✍ Scribed by Chris Brooks; Melvin J. Hinich
- Publisher
- John Wiley and Sons
- Year
- 2001
- Tongue
- English
- Weight
- 242 KB
- Volume
- 20
- Category
- Article
- ISSN
- 0277-6693
No coin nor oath required. For personal study only.
✦ Synopsis
This paper proposes and implements a new methodology for forecasting time series, based on bicorrelations and cross-bicorrelations. It is shown that the forecasting technique arises as a natural extension of, and as a complement to, existing univariate and multivariate non-linearity tests. The formulations are essentially modi®ed autoregressive or vector autoregressive models respectively, which can be estimated using ordinary least squares. The techniques are applied to a set of high-frequency exchange rate returns, and their out-of-sample forecasting performance is compared to that of other time series models.