Journal Article10.1002/JAE.2643
A test of general asymmetric dependence
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TL;DR: This paper proposed a modified mutual information measure to capture general asymmetric dependence between two random variables and examined its finite-sample performance, and found that the dependence between developed country markets and the US market is stronger when both markets are in a downturn.
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Abstract: We propose a modified mutual information measure to capture general asymmetric dependence between two random variables. Based on this measure, we propose a test of asymmetric dependence and examine its finite‐sample performance. We show that our test has better power than competing tests with alternative dependence measures. Using the new test, we find significant asymmetric dependence in returns of commonly used stock portfolios and the market return both in the US and other developed countries. Further, the dependence between developed country markets and the US market is stronger when both markets are in a downturn.
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References
•Posted Content
Asymmetries in Stock Returns: Statistical Tests and Economic Evaluation
Yongmiao Hong,Jun Tu,Guofu Zhou +2 more
TL;DR: In this article, the authors provide a model-free test for asymmetric correlations in which stocks move more often with the market when the market goes down than when it goes up.
312
Consistent Nonparametric Entropy-Based Testing
TL;DR: In this paper, a new class of tests for nonparametric hypotheses, with special reference to the problem of testing for independence in time series in the presence of a non-parametric marginal distribution under the null, is proposed.
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Consistent Significance Testing for Nonparametric Regression
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