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A low-dimension portmanteau test for non-linearity

Abstract:

A new test for non-linearity in the conditional mean is proposed using functions of the principal components of regressors. The test extends the non-linearity tests based on Kolmogorov-Gavor polynomials (Thursby and Schmidt, 1977, Tsay, 1986, and Terasvirta, Lin and Granger, 1993), but circumvents problems of high dimensionality, is equivariant to collinearity, and includes exponential functions, so is a portmanteau test with power against a wide range of possible alternatives. A Monte Carl...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2010-01-01
Paper number:
471
Keywords:
Pubs id:
1143954
Local pid:
pubs:1143954
Deposit date:
2020-12-15

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