{smcl} {* 04 Aug 2006}{...} {hline} help for {hi:lomackinlay} {hline} {title:Perform Lo-MacKinlay variance ratio test} {p 8 17 2} {cmd:lomackinlay} {it:varname} [{cmd:if} {it:exp}] [{cmd:in} {it:range}] [{cmd:,} {cmdab:q:(}{it:numlist}{cmd:)} {cmd:gaps} {cmd:robust} ] {p 4 4 2} {cmd:lomackinlay} is for use on time series data, which must be {help tsset}. It may be applied to a single panel of a panel ({it:xt}) data set using an {cmd:if} qualifier. {cmd:lomackinlay} also supports the {cmd:by:} prefix. {title:Description} {p 4 4 2} {cmd: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 {it:varlist}. If the assumption of homoskedastic errors in the process generating the differenced series is not reasonable, the {it:robust} option may be used to calculate a variance ratio test statistic robust to arbitrary heteroskedasticity. {title:Options} {p 4 8 2}{cmd:q(numlist)} optionally specifies a {it:numlist} of values for the span of differencing. If not provided, the {it:numlist} of 2 4 8 16 is applied. {p 4 8 2} {cmd:gaps} is used to indicate that gaps in the timeseries are allowed. {p 4 8 2} {cmd:robust} specifies that a heteroskedasticity-robust test statistic should be computed. {title:Examples} {p 4 8 2}{stata "webuse wpi1" :. webuse wpi1}{p_end} {p 4 8 2}{stata "lomackinlay ln_wpi" :. lomackinlay ln_wpi}{p_end} {p 4 8 2}{stata "lomackinlay ln_wpi, robust" :. lomackinlay ln_wpi, robust}{p_end} {p 4 8 2}{stata "lomackinlay ln_wpi, q(2 3 5 7 9)" :. lomackinlay ln_wpi, q(2 3 5 7 9)}{p_end} {title:References} Campbell, J. Y., Lo, A. W. and A. C. MacKinlay, The Econometrics of Financial Markets. Princeton: Princeton University Press, 1997. Lo, A. and MacKinlay, A. C., "Stock market prices do not follow random walks: evidence from a simple specification test", Review of Financial Studies 1:1, 1988. 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/ Tse, Ng and Zhang, "A small-sample overlapping variance-ratio test", available from www.mysmu.edu/faculty/yktse/JTSA_R.pdf {title:Author} {p 4 4 2}Christopher F Baum, Boston College{break} baum@bc.edu {title:Acknowledgements} {p 4 4 2}Tomasz Stepniak's query to Statalist suggested this problem. I am very grateful to Allin Cottrell for pointing out several corrections required in the code and providing corrected code. Brian Fryd also pointed out an error in the routine and provided a fix, for which I thank him. {title:Also see} {p 4 13 2}On-line: help for {help lomodrs} (if installed)