Nonparametric test for a constant beta between \Ito semi-martingales based on high-frequency data
Statistics Theory
2015-02-20 v2 Statistics Theory
Abstract
We derive a nonparametric test for constant beta over a fixed time interval from high-frequency observations of a bivariate \Ito semimartingale. Beta is defined as the ratio of the spot continuous covariation between an asset and a risk factor and the spot continuous variation of the latter. The test is based on the asymptotic behavior of the covariation between the risk factor and an estimate of the residual component of the asset, that is orthogonal (in martingale sense) to the risk factor, over blocks with asymptotically shrinking time span. Rate optimality of the test over smoothness classes is derived.
Cite
@article{arxiv.1403.0349,
title = {Nonparametric test for a constant beta between \Ito semi-martingales based on high-frequency data},
author = {Markus Reiß and Viktor Todorov and George Tauchen},
journal= {arXiv preprint arXiv:1403.0349},
year = {2015}
}