The cross-quantilogram: measuring quantile dependence and testing directional predictability between time series

DOI10.1016/J.JECONOM.2016.03.001zbMATH Open1420.62380arXiv1402.1937OpenAlexW2131375261MaRDI QIDQ284329FDOQ284329

Authors: Heejoon Han, Tatsushi Oka, Oliver Linton, Yoon-Jae Whang 

Publication date: 18 May 2016

Published in: Journal of Econometrics (Search for Journal in Brave)

Abstract: This paper proposes the cross-quantilogram to measure the quantile dependence between two time series. We apply it to test the hypothesis that one time series has no directional predictability to another time series. We establish the asymptotic distribution of the cross quantilogram and the corresponding test statistic. The limiting distributions depend on nuisance parameters. To construct consistent confidence intervals we employ the stationary bootstrap procedure; we show the consistency of this bootstrap. Also, we consider the self-normalized approach, which is shown to be asymptotically pivotal under the null hypothesis of no predictability. We provide simulation studies and two empirical applications. First, we use the cross-quantilogram to detect predictability from stock variance to excess stock return. Compared to existing tools used in the literature of stock return predictability, our method provides a more complete relationship between a predictor and stock return. Second, we investigate the systemic risk of individual financial institutions, such as JP Morgan Chase, Goldman Sachs and AIG. This article has supplementary materials online.

Full work available at URL: https://arxiv.org/abs/1402.1937

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zbMATH Keywords

quantiledependencesystemic riskcorrelogrampredictability

Mathematics Subject Classification ID

Nonparametric hypothesis testing (62G10) Asymptotic properties of nonparametric inference (62G20) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to actuarial sciences and financial mathematics (62P05)

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Cited In (31)

• Whittle estimation based on the extremal spectral density of a heavy-tailed random field
• Agricultural commodity futures trading based on cross-country rolling quantile return signals
• Measuring network systemic risk contributions: a leave-one-out approach
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• Tail event driven networks of SIFIs
• Quantile spectral processes: asymptotic analysis and inference
• Bootstrapping quantile correlations with an application for income status across generations
• Nonlinear Spectral Analysis: A Local Gaussian Approach
• Estimating and Testing Nonlinear Local Dependence Between Two Time Series
• Inference on the tail process with application to financial time series modeling
• Testing the martingale difference hypothesis in high dimension
• Multivariate quantile impulse response functions
• Quantile autocovariances: a powerful tool for hard and soft partitional clustering of time series
• Dependence structure between Indian financial market and energy commodities: a cross-quantilogram based evidence
• Estimating impulse-response functions for macroeconomic models using directional quantiles
• Empirical Dynamic Quantiles for Visualization of High-Dimensional Time Series
• Quantilograms under strong dependence
• Reduced form vector directional quantiles
• The integrated copula spectrum
• The quantilogram: with an application to evaluating directional predictability
• Quantile correlation coefficient: a new tail dependence measure
• A SIMPLE NONPARAMETRIC APPROACH FOR ESTIMATION AND INFERENCE OF CONDITIONAL QUANTILE FUNCTIONS
• Herding Behavior and Liquidity in the Cryptocurrency Market
• Quantile Co-Movement in Financial Markets: A Panel Quantile Model With Unobserved Heterogeneity
• Functional quantile autoregression
• Inference in predictive quantile regressions
• Validation of association
• Predictive quantile regression with persistent covariates: IVX-QR approach
• QUANTILE CORRELATIONS: UNCOVERING TEMPORAL DEPENDENCIES IN FINANCIAL TIME SERIES
• Confidence Intervals for Conditional Tail Risk Measures in ARMA–GARCH Models
• The nexus between black and digital gold: evidence from US markets

Uses Software

• CAViaR
• quantilogram

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