The Variance Ratio Test with Stable Paretian Errors
نویسندگان
چکیده
In this paper we examine the distribution of the variance ratio statistic when the errors are distributed with thick tails as described by the family of stable Paretian distributions. The asymptotic distribution of the OVR statistic, which depends on the characteristic exponent, can be estimated using simulation. It is found that the convergence of the distribution of the OVR statistic to its asymptotic limit is extremely slow. Thus, the asymptotic result will not be able to provide any useful approximation in ̄nite samples. To facilitate the OVR statistic as a test for the random walk hypothesis, we estimated the tail quantiles for several ̄nite sample sizes.
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