Abstract:
This paper introduces and applies the bootstrap method to compare the power of the test for
asymmetry in the Granger and Lee (1989) and Von Cramon-Taubadel and Loy (1996) models. The results
of the bootstrap simulations indicate that the power of the test for asymmetry depends on various
conditions such as the bootstrap sample size, model complexity, difference in adjustment speeds and the
amount of noise in the data generating process used in the application. The true model achieves greater
power when compared with the complex model. With small bootstrap sample size or large noise, both
models display low power in rejecting the (false) null hypothesis of symmetry
