Identifying the Most Relevant Lag with Runs

ABSTRACT In this paper, we propose a nonparametric statistical tool to identify the most relevant lag in the model description of a time series. It is also shown that it can be used for model identification. The statistic is based on the number of runs, when the time series is symbolized depending on the empirical quantiles of the time series. With a Monte Carlo simulation, we show the size and power performance of our new test statistic under linear and nonlinear data generating processes. From the theoretical point of view, it is the first time that symbolic analysis and runs are proposed to identifying characteristic lags and also to help in the identification of univariate time series models. From a more applied point of view, the results show the power and competitiveness of the proposed tool with respect to other techniques without presuming or specifying a model