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Test of Significance of Misclassifying First Order Bilinear Processes as Linear Processes

Ohakwe Johnson, Iheanyi S. Iwueze


As a result of the similarity in covariance structure, a nonlinear purely diagonal bilinear model of order one denoted by PDB(1) can easily be misclassified as a linear moving average model of order one denoted by MA(1). In this paper we construct a test of significance for testing bilinearity. The test statistic derived was applied on simulated example and it was discovered that the significance of the test is affected by sample size (n or the number data points in the series). Using the simulated examples, it was also discovered that the residual series resulting from misclassifying a PDB(1) as an MA(1) is a normally distributed series with zero mean.


Purely Diagonal bilinear Model of Order One; Moving Average Model of Order One; Misclassification; Test of Significance; OI test statistic

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