Detecting serial dependence in tail events: a test dual to the BDS test

A test for serial independence is proposed which is related to the BDS test but focuses on tail event probabilities to obtain a test more suitable for detecting structure in standardized residuals of financial time series. The new test can be implemented easily by slight modification of the standard BDS test, and is also suitable for model identification. For all non-linear stochastic time series models examined the new test has increased power