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Coefficient constancy test in AR-ARCH models

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  • Ha, Jeongcheol
  • Lee, Sangyeol
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    Abstract

    In this article, we consider the problem of testing the coefficient constancy in the AR-ARCH model: yt=([phi]+bt)yt-1+[var epsilon]t, where [var epsilon]t=[eta]t-1[xi]t, [eta]t-1=([alpha]0+[alpha]1[var epsilon]t-12)1/2 and [xi]t are iid r.v.'s. Under the assumption that bt and [xi]t are Gaussian, a locally best invariant test is provided for testing whether bt are identically zero or not. Since the exact distribution of the test statistic is hard to obtain, its limiting distribution is investigated. It is shown that the test statistic depends upon the parameter estimators and is asymptotically normal under the null hypothesis.

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    Bibliographic Info

    Article provided by Elsevier in its journal Statistics & Probability Letters.

    Volume (Year): 57 (2002)
    Issue (Month): 1 (March)
    Pages: 65-77

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    Handle: RePEc:eee:stapro:v:57:y:2002:i:1:p:65-77

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    Related research

    Keywords: RCA model ARCH model AR-ARCH model Locally best invariant test Asymptotically normal;

    References

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    1. McCabe,B.P.M. & Tremayne,A.R., 1995. "Testing a Time-Series for Difference Stationarity," Cambridge Working Papers in Economics 9420, Faculty of Economics, University of Cambridge.
    2. Lumsdaine, Robin L, 1996. "Consistency and Asymptotic Normality of the Quasi-maximum Likelihood Estimator in IGARCH(1,1) and Covariance Stationary GARCH(1,1) Models," Econometrica, Econometric Society, vol. 64(3), pages 575-96, May.
    3. Conlisk, John, 1976. "A Further Note on Stability in a Random Coefficient Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(3), pages 759-64, October.
    4. Lee, Sang-Won & Hansen, Bruce E., 1994. "Asymptotic Theory for the Garch(1,1) Quasi-Maximum Likelihood Estimator," Econometric Theory, Cambridge University Press, vol. 10(01), pages 29-52, March.
    5. Tanaka, Katsuto, 1983. "Non-Normality of the Lagrange Multiplier Statistic for Testing the Constancy of Regression Coefficients," Econometrica, Econometric Society, vol. 51(5), pages 1577-82, September.
    6. Conlisk, John, 1974. "Stability in a Random Coefficient Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 529-33, June.
    7. Ramanathan, R. V. & Rajarshi, M. B., 1994. "Rank tests for testing the randomness of autoregressive coefficients," Statistics & Probability Letters, Elsevier, vol. 21(2), pages 115-120, September.
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