A Lagrange multiplier test for testing the adequacy of the constant conditional correlation GARCH model

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Catani , P , Teräsvirta , T & Yin , M 2017 , ' A Lagrange multiplier test for testing the adequacy of the constant conditional correlation GARCH model ' , Econometric Reviews , vol. 36 , no. 6-9 , pp. 599-621 . https://doi.org/10.1080/07474938.2017.1307311

Title: A Lagrange multiplier test for testing the adequacy of the constant conditional correlation GARCH model
Author: Catani, Paul; Teräsvirta, Timo; Yin, Meiqun
Contributor: Hanken School of Economics, Statistics, Helsinki
Belongs to series: Econometric Reviews
ISSN: 0747-4938
Abstract: A Lagrange multiplier test for testing the parametric structure of a constant conditional correlation-generalized autoregressive conditional heteroskedasticity (CCC-GARCH) model is proposed. The test is based on decomposing the CCC-GARCH model multiplicatively into two components, one of which represents the null model, whereas the other one describes the misspecification. A simulation study shows that the test has good finite sample properties. We compare the test with other tests for misspecification of multivariate GARCH models. The test has high power against alternatives where the misspecification is in the GARCH parameters and is superior to other tests. The test is not greatly affected by misspecification in the conditional correlations and is therefore well suited for considering misspecification of GARCH equations.
Date: 2017
Subject: 112 Statistics and probability
Constant conditional correlation
LM test
misspecification testing
modeling volatility
multivariate GARCH
511 Economics
Constant conditional correlation
LM test
misspecification testing
modeling volatility
multivariate GARCH
PREM2017_10
0 - Not open access
1 - Self archived
1- Minst en av författarna har en utländsk affiliation
1- Publicerad utomlands
0- Ingen affiliation med ett företag
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