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Computational Economics

, Volume 13, Issue 3, pp 249–263 | Cite as

Portmanteau Model Diagnostics and Tests for Nonlinearity: A Comparative Monte Carlo Study of Two Alternative Methods

  • Chris Brooks
Article

Abstract

This paper employs an extensive Monte Carlo study to test the size and power of the BDS and close return methods of testing for departures from independent and identical distribution. It is found that the finite sample properties of the BDS test are far superior and that the close return method cannot be recommended as a model diagnostic. Neither test can be reliably used for very small samples, while the close return test has low power even at large sample sizes.

BDS test close return test model diagnostic nonlinearity Monte Carlo study 

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Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Chris Brooks
    • 1
  1. 1.ISMA Centre, Department of EconomicsUniversity of ReadingReading, BerksUK; E-mail

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