Lasse Petersen, Niels Richard Hansen.
Year: 2021, Volume: 22, Issue: 70, Pages: 1−47
The partial copula provides a method for describing the dependence between two random variables $X$ and $Y$ conditional on a third random vector $Z$ in terms of nonparametric residuals $U_1$ and $U_2$. This paper develops a nonparametric test for conditional independence by combining the partial copula with a quantile regression based method for estimating the nonparametric residuals. We consider a test statistic based on generalized correlation between $U_1$ and $U_2$ and derive its large sample properties under consistency assumptions on the quantile regression procedure. We demonstrate through a simulation study that the resulting test is sound under complicated data generating distributions. Moreover, in the examples considered the test is competitive to other state-of-the-art conditional independence tests in terms of level and power, and it has superior power in cases with conditional variance heterogeneity of $X$ and $Y$ given $Z$.