J. Econometrics Vol. 82 (1) pp. 157-192
a William A. Barnett
b A. Ronald Gallant
c Melvin J. Hinich
d Jochen A. Jungeilges
e Daniel T. Kaplan
f Mark J. Jensen
a Department of Economics, Washington University in St. Louis, Campus Box 1208, Brooking Drive, St Louis, MO 63130, USA
b University of North Carolina, at Chapel Hill, USA
c University of Texas at, Austin, USA
d University of Osnabrück, Germany
e Macalester College, USA
f University of Missouri, USA
Interest has been growing in testing for nonlinearity or chaos in economic data, but much controversy has arisen about the available results. This paper explores the reasons for these empirical difficulties. We designed and ran a single-blind controlled competition among five highly regarded tests for nonlinearity or chaos with ten simulated data series. The data generating mechanisms include linear processes, chaotic recursions, and nonchaotic stochastic processes; and both large and small samples were included in the experiment. The data series were produced in a single blind manner by the competition manager and sent by e-mail, without identifying information, to the experiment participants. Each such participant is an acknowledged expert in one of the tests and has a possible vested interest in producing the best possible results with that one test. The results of this competition provide much surprising information about the power functions of some of the best regarded tests for nonlinearity or noisy chaos. © 1997 Elsevier Science S.A.
Keyword(s): Competition; Chaos; Nonlinearity; Experiment
JEL Classification: C12; C15; C22; C45