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A diagnostic m-test for distributional specification of parametric conditional heteroscedasticity models for financial data

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  • Lejeune, Bernard
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    Abstract

    This paper proposes a convenient and generally applicable diagnostic m-test for checking the distributional specification of parametric conditional heteroscedasticity models for financial data such as the customary Student t GARCH model. The proposed test is based on the moments of the probability integral transform of the innovations of the assumed model. Monte-Carlo evidence indicates that our test performs well both in terms of size and power. An empirical example illustrates the practical usefulness of the test and some of its possible extensions are outlined.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 16 (2009)
    Issue (Month): 3 (June)
    Pages: 507-523

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    Handle: RePEc:eee:empfin:v:16:y:2009:i:3:p:507-523

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    Web page: http://www.elsevier.com/locate/jempfin

    Related research

    Keywords: Parametric conditional heteroscedasticity models Distributional specification test m-testing;

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