A test for the rank of the volatility process: the random perturbation approach
AbstractIn this paper we present a test for the maximal rank of the matrix-valued volatility process in the continuous Itô semimartingale framework. Our idea is based upon a random perturbation of the original high frequency observations of an Itô semimartingale, which opens the way for rank testing. We develop the complete limit theory for the test statistic and apply it to various null and alternative hypotheses. Finally, we demonstrate a homoscedasticity test for the rank process.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2012-57.
Date of creation: 14 Dec 2012
Date of revision:
Contact details of provider:
Web page: http://www.econ.au.dk/afn/
central limit theorem; high frequency data; homoscedasticity testing; Itô semimartingales; rank estimation; stable convergence.;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-ECM-2013-01-07 (Econometrics)
- NEP-ETS-2013-01-07 (Econometric Time Series)
- NEP-MST-2013-01-07 (Market Microstructure)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Susanne Ditlevsen & Michael Sørensen, 2004. "Inference for Observations of Integrated Diffusion Processes," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics & Finnish Statistical Society & Norwegian Statistical Association & Swedish Statistical Association, vol. 31(3), pages 417-429.
- Robin, J.M. & Smith, R.J., 1995.
"Tests of Rank,"
Cambridge Working Papers in Economics
9521, Faculty of Economics, University of Cambridge.
- Jacod, Jean, 2008. "Asymptotic properties of realized power variations and related functionals of semimartingales," Stochastic Processes and their Applications, Elsevier, vol. 118(4), pages 517-559, April.
- Mark Podolskij & Mathieu Rosenbaum, 2012.
"Testing the local volatility assumption: a statistical approach,"
Annals of Finance,
Springer, vol. 8(1), pages 31-48, February.
- Mark Podolskij & Mathieu Rosenbaum, 2011. "Testing the local volatility assumption: a statistical approach," CREATES Research Papers 2011-04, School of Economics and Management, University of Aarhus.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.