WESTCHOTEST Procedure

@WESTCHOTEST computes the modified Ljung-Box test, robust to heteroscedasticity, proposed in West and Cho(1995). Note that this test is not the main point of the paper.

@WestChoTest( options ) series start end

Parameters

series	series to analyze
start, end	range of series to use. By default, the defined range of series.

Options

NUMBER=number of lags to use [roughly 2 sqrt(# of observations]

DFC=degrees of freedom correction for Q [0]

[PRINT]/NOPRINT

TITLE=title for test output ["West-Cho Test for Series xxxx"]

Variables Defined

%NOBS	number of observations (INTEGER)
%CDSTAT	test statistic (REAL)
%QSTAT	test statistic (REAL)
%SIGNIF	marginal significance level of Q-statistic (REAL)
%QSIGNIF	marginal significance level of Q-statistic (REAL)
%NDFQ	degrees of freedom for the test statistic (INTEGER)

Example

* Replication file for West and Cho(1995), "The predictive ability of

* several models of exchange rate volatility," Journal of Econometrics,

* vol. 69, no 2, 367-391.

* Table 1. Summary statistics.

open data westcho_xrate.xls

calendar(w) 1973:3:7

data(format=xls,org=col) 1973:03:07 1989:09:20 scan sfra sger sita sjap sukg

set xcan = 100.0*(scan-scan{1})

set xfra = 100.0*(sfra-sfra{1})

set xger = 100.0*(sger-sger{1})

set xita = 100.0*(sita-sita{1})

set xjap = 100.0*(sjap-sjap{1})

set xukg = 100.0*(sukg-sukg{1})

compute s=xcan

stats(fractiles) s

@westchotest(number=10) s

@westchotest(number=50) s

@westchotest(number=90) s

Sample Output

West-Cho Modified Q Test, Series XCAN

Q(10) 7.45

Signif. 0.6825