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Information Matrix Test, Parameter Heterogeneity and ARCH: A Synthesis

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  • Anil K. Bera
  • Sangkyu Lee

Abstract

We apply the White information matrix (IM) test to the linear regression model with autocorrelated errors. A special case of one component of the test is found to be identical to the Engle Lagrange multiplier (LM) test for autoregressive conditional heteroskedasticity (ARCH). Given Chesher's interpretation of the IM test as a test for parameter heterogeneity, this establishes a connection among the IM test, ARCH and parameter variation. This also enables us to specify conditional heteroskedasticity in a more general and convenient way. Other interesting by-products of our analysis are tests for the variation in conditional and static skewness which we call tests for "heterocliticity".

Suggested Citation

  • Anil K. Bera & Sangkyu Lee, 1993. "Information Matrix Test, Parameter Heterogeneity and ARCH: A Synthesis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 229-240.
    • Handle: RePEc:oup:restud:v:60:y:1993:i:1:p:229-240.
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    File URL: http://hdl.handle.net/10.2307/2297820
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    Cited by:

    1. Dark Jonathan Graeme, 2010. "Estimation of Time Varying Skewness and Kurtosis with an Application to Value at Risk," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 14(2), pages 1-50, March.
    2. Deschamps, P J, 1993. "Joint Tests for Regularity and Autocorrelation in Allocation Systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(2), pages 195-211, April-Jun.
    3. Dante Amengual & Gabriele Fiorentini & Enrique Sentana, 2022. "Tests for Random Coefficient Variation in Vector Autoregressive Models," Advances in Econometrics, in: Essays in Honour of Fabio Canova, volume 44, pages 1-35, Emerald Group Publishing Limited.
    4. Strijbosch, L.W.G. & Heuts, R.M.J., 1994. "Investigating several alternatives for estimating the lead time demand distribution in a continuous review inventory model," Other publications TiSEM dc1f886c-0122-4da9-9598-8, Tilburg University, School of Economics and Management.
    5. Marwan Elkhoury, 2005. "A Time-Varying Parameter Model of A Monetary Policy Rule for Switzerland. The Case of the Lucas and Friedman Hypothesis," IHEID Working Papers 01-2006, Economics Section, The Graduate Institute of International Studies.
    6. Bera, Anil K. & Kim, Sangwhan, 2002. "Testing constancy of correlation and other specifications of the BGARCH model with an application to international equity returns," Journal of Empirical Finance, Elsevier, vol. 9(2), pages 171-195, March.
    7. Gómez-Déniz, E., 2004. "A note on mixture prior distributions with applications in actuarial statistic/Sobre las Distribuciones a Priori Mixtas con Aplicaciones en la Estadística Actuarial," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 22, pages 372(15á)-37, Agosto.

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