{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. The
standarized variance ratio, labeled R_s, is distributed as Normal under the null
hypothesis of a random walk.
{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. https://www.jstor.org/stable/j.ctt7tccx.9
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)