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.
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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
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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.:
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CREATES Research Papers
2011-04, School of Economics and Management, University of Aarhus.
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Cambridge Working Papers in Economics
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