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st: Lo-MacKinlay variance ratio test


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Lo-MacKinlay variance ratio test
Date   Thu, 22 Jun 2006 11:44:47 -0400

The lomackinlay routine, available from SSC:

lomackinlay computes a overlapping variance-ratio test on a timeseries. The timeseries
should be in level form; e.g., to test that stock returns vary randomly around a constant
mean, you consider the null hypothesis that the log price series is a random walk with
drift. The log price series would then be given in the varlist. If the assumption of
homoskedastic errors in the process generating the differenced series is not reasonable,
the robust option may be used to calculate a variance ratio test statistic robust to
arbitrary heteroskedasticity.

This test is described in Lo, A. W. and A. C. MacKinlay, A Non-Random Walk Down Wall Street.
Princeton: Princeton University Press, 1999. http:// www.pupress.princeton.edu/books/lo/

Thanks to Tomasz Stepniak for suggesting that this routine be written, and for helping test initial versions of the routine.

Kit Baum, Boston College Economics
http://ideas.repec.org/e/pba1.html


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