Small sample properties of alternative tests for martingale difference hypothesis

A Monte Carlo experiment is conducted to compare power properties of alternative tests for the martingale difference hypothesis. Overall, we find that the wild bootstrap automatic variance ratio test shows the highest power against linear dependence; while the generalized spectral test performs most desirably under nonlinear dependence.

Research Highlights►A Monte Carlo experiment is conducted to compare power properties of alternative tests for the martingale difference hypothesis. ►The wild bootstrap automatic variance ratio test shows the highest power against linear dependence. ►The generalized spectral test performs most desirably under nonlinear dependence.