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Econometric Approach Of Heteroskedasticity On Financial Time Series In A General Framework

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  • FELICIA RAMONA BIRAU

    (UNIVERSITY OF CRAIOVA,FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION)

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    Abstract

    The aim of this paper is to provide an overview of the diagnostic tests for detecting heteroskedasticity on financial time series. In financial econometrics, heteroskedasticity is generally associated with cross sectional data but can also be identified modeling time series data. The presence of heteroscedasticity in financial time series can be caused by certain specific factors, like a model misspecification, inadequate data transformation or as a result of certain outliers. Heteroskedasticity arise when the homoskedasticity assumption is violated. Testing for the presence of heteroskedasticity in financial time is performed by applying diagnostic test, such as : Breusch-Pagan LM test, White’s test, Glesjer LM test, Harvey-Godfrey LM test, Park LM test and Goldfeld-Quand test.

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    Bibliographic Info

    Article provided by Constantin Brancusi University, Faculty of Economics in its journal Constatin Brancusi University of Targu Jiu Annals - Economy Series.

    Volume (Year): 4I (2012)
    Issue (Month): (December)
    Pages: 74-77

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    Handle: RePEc:cbu:jrnlec:y:2012:v:4i:p:74-77

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    Related research

    Keywords: heteroskedasticity; linear dependence; variance; volatility clustering; non-normal distribution;

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    1. Bollerslev, Tim & Engle, Robert F, 1993. "Common Persistence in Conditional Variances," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 167-86, January.
    2. Strozzi, Fernanda & Zaldı́var, José-Manuel & Zbilut, Joseph P, 2002. "Application of nonlinear time series analysis techniques to high-frequency currency exchange data," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 312(3), pages 520-538.
    3. Guneratne Banda Wickremasinghe, 2004. "Efficiency Of Foreign Exchange Markets: A Developing Country Perspective," International Finance, EconWPA 0406004, EconWPA.
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