Abstract
The discrete nature of financial markets time-series data may prejudice the BDS and Close Returns test for nonlinearity. Our estimation results suggest that a tick/volatility ratio threshold exists, beyond which the test results are biased. Further, tick/volatility ratios that exceed these thresholds are frequently observed in financial markets data, which suggests that the results of the BDS and CR test must be interpreted with caution.
| Original language | English |
|---|---|
| Pages (from-to) | 1-7 |
| Number of pages | 7 |
| Journal | Journal of mathematical finance |
| Volume | 1 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2011 |
| Externally published | Yes |
Keywords
- Compass Rose
- Tick/Volatility Ratio
- BDS Test
- Close Returns Test