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A Locally Asymptotically Optimal Test With Application to Financial Data

Volume 21, Number 1 (2018), 57 - 72

A Locally Asymptotically Optimal Test With Application to Financial Data

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Abstract

A locally asymptotically optimal test is constructed for log-return processes. The behavior of the test statistic is studied under the null and under a sequence of local alternatives. A local asymptotic normality (LAN) result is previously established. Applying the test to log-return data, one rejects the hypothesis that they are independent and identically distributed (iid).