A non-nested test of GARCH vs. EGARCH models
Abstract
This study uses a Cox-type non-nested test. The test is obtained using Monte Carlo hypothesis tests with the log likelihood ratio as the test statistic. Monte Carlo methods are used to obtain the probability of a larger value of the test statistic under the null hypothesis. The approach used does not rely upon asymptotic normality. Using the maximum likelihood estimation technique, two competing time series models, generalized autoregressive conditional heteroscedasticity (GARCH) and exponential GARCH (EGARCH) models of daily spot prices of Deutsche mark are estimated. Using Monte Carlo hypothesis tests, then, p-values for GARCH vs. EGARCH models are calculated. The EGARCH model cannot be rejected, while the GARCH model is rejected.Download Info
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Bibliographic Info
Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.
Volume (Year): 4 (1997)
Issue (Month): 12 ()
Pages: 765-768
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Malmsten, Hans & Teräsvirta, Timo, 2004. "Stylized Facts of Financial Time Series and Three Popular Models of Volatility," Working Paper Series in Economics and Finance 563, Stockholm School of Economics, revised 03 Sep 2004.
- Jonathan Batten & Francis In, 2006. "Dynamic interaction and valuation of quality yen Eurobonds in a multivariate EGARCH framework," Applied Financial Economics, Taylor and Francis Journals, vol. 16(12), pages 881-892.
- M. Karanasos & J. Kim, 2003.
"Moments of the ARMA--EGARCH model,"
Econometrics Journal,
Royal Economic Society, vol. 6(1), pages 146-166, 06.
- Menelaos Karanasos & J. Kim, . "Moments of the ARMA-EGARCH Model," Discussion Papers 00/29, Department of Economics, University of York.
- Malmsten, Hans, 2004. "Evaluating exponential GARCH models," Working Paper Series in Economics and Finance 564, Stockholm School of Economics, revised 03 Sep 2004.
- In, Francis & Brown, Rob & Fang, Victor, 2003. "Modeling volatility and changes in the swap spread," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 545-561.
- Teräsvirta, Timo, 2006. "An introduction to univariate GARCH models," Working Paper Series in Economics and Finance 646, Stockholm School of Economics.
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