Change-point detection in GARCH models: asymptotic and bootstrap tests
AbstractTwo classes of tests designed to detect changes in volatility are proposed. Procedures based on squared model residuals and on the likelihood ratio are considered. The tests are applicable to parametric nonlinear models like GARCH. Both asymptotic and bootstrap tests are investigated by means of a simulation study and applied to returns data. The tests based onthe likelihood ratio are shown to be generally preferable. A wavelet based estimator of long memory is applied to returns data to shed light on the interplay of change points and long memory.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2002065.
Date of creation: 00 Dec 2002
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GARCH model; change-point; likelihood ratio; parametric bootstrap; squared residuals; size-power curves; wavelets;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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- Kirman, Alan & Teyssiere, Gilles, 2005. "Testing for bubbles and change-points," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 765-799, April.
- TEYSSIERE, Gilles, 2003. "Interaction models for common long-range dependence in asset price volatilities," CORE Discussion Papers 2003026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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