A consistent characteristic function-based test for conditional independence

Y is conditionally independent of Z given X if Pr{f(y|X,Z)=f(y|X)}=1 for all y on its support, where f(·|·) denotes the conditional density of Y given (X,Z) or X. This paper proposes a nonparametric test of conditional independence based on the notion that two conditional distributions are equal if...

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Main Authors: SU, Liangjun, WHITE, Halbert
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Language:English
Published: Institutional Knowledge at Singapore Management University 2007
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Online Access:https://ink.library.smu.edu.sg/soe_research/2005
https://ink.library.smu.edu.sg/context/soe_research/article/3004/viewcontent/A_consistent_characteristic_function_based_test_fo.pdf
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spelling sg-smu-ink.soe_research-30042017-08-10T09:37:13Z A consistent characteristic function-based test for conditional independence SU, Liangjun WHITE, Halbert Y is conditionally independent of Z given X if Pr{f(y|X,Z)=f(y|X)}=1 for all y on its support, where f(·|·) denotes the conditional density of Y given (X,Z) or X. This paper proposes a nonparametric test of conditional independence based on the notion that two conditional distributions are equal if and only if the corresponding conditional characteristic functions are equal. We extend the test of Su and White (2005. A Hellinger-metric nonparametric test for conditional independence. Discussion Paper, Department of Economics, UCSD) in two directions: (1) our test is less sensitive to the choice of bandwidth sequences; (2) our test has power against deviations on the full support of the density of (X,Y,Z). We establish asymptotic normality for our test statistic under weak data dependence conditions. Simulation results suggest that the test is well behaved in finite samples. Applications to stock market data indicate that our test can reveal some interesting nonlinear dependence that a traditional linear Granger causality test fails to detect. 2007-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soe_research/2005 info:doi/10.1016/j.jeconom.2006.11.006 https://ink.library.smu.edu.sg/context/soe_research/article/3004/viewcontent/A_consistent_characteristic_function_based_test_fo.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University Conditional characteristic function Conditional independence Granger noncausality Nonparametric regression U-statistics Econometrics
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Conditional characteristic function
Conditional independence
Granger noncausality
Nonparametric regression
U-statistics
Econometrics
spellingShingle Conditional characteristic function
Conditional independence
Granger noncausality
Nonparametric regression
U-statistics
Econometrics
SU, Liangjun
WHITE, Halbert
A consistent characteristic function-based test for conditional independence
description Y is conditionally independent of Z given X if Pr{f(y|X,Z)=f(y|X)}=1 for all y on its support, where f(·|·) denotes the conditional density of Y given (X,Z) or X. This paper proposes a nonparametric test of conditional independence based on the notion that two conditional distributions are equal if and only if the corresponding conditional characteristic functions are equal. We extend the test of Su and White (2005. A Hellinger-metric nonparametric test for conditional independence. Discussion Paper, Department of Economics, UCSD) in two directions: (1) our test is less sensitive to the choice of bandwidth sequences; (2) our test has power against deviations on the full support of the density of (X,Y,Z). We establish asymptotic normality for our test statistic under weak data dependence conditions. Simulation results suggest that the test is well behaved in finite samples. Applications to stock market data indicate that our test can reveal some interesting nonlinear dependence that a traditional linear Granger causality test fails to detect.
format text
author SU, Liangjun
WHITE, Halbert
author_facet SU, Liangjun
WHITE, Halbert
author_sort SU, Liangjun
title A consistent characteristic function-based test for conditional independence
title_short A consistent characteristic function-based test for conditional independence
title_full A consistent characteristic function-based test for conditional independence
title_fullStr A consistent characteristic function-based test for conditional independence
title_full_unstemmed A consistent characteristic function-based test for conditional independence
title_sort consistent characteristic function-based test for conditional independence
publisher Institutional Knowledge at Singapore Management University
publishDate 2007
url https://ink.library.smu.edu.sg/soe_research/2005
https://ink.library.smu.edu.sg/context/soe_research/article/3004/viewcontent/A_consistent_characteristic_function_based_test_fo.pdf
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