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Post-Sample Prediction Tests for the Efficient Method of Moments

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  • Pieter J. van der Sluis

    (University of Amsterdam)

Abstract

In this paper a post-sample prediction test is derived forestimators based on the Efficient Method of Moments. The mainadvantage of this particular test over other stability tests isthat no time-consuming estimation of the structural parameters forthe post-sample is needed. The asymptotic properties of the testand local power properties against certain alternatives are deduced.Using the Efficient Method of Moments methodology, anapplication is made to stochastic volatility models for theBritish pound versus Canadian dollar exchange rates. The breakpointfor the stability test is a priori set at September 16th 1992,when Britain was forced to leave the European Monetary UnionExchange Rate System.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 97-054/4.

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Date of creation: 30 May 1997
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Handle: RePEc:dgr:uvatin:19970054

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Web page: http://www.tinbergen.nl

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References

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  1. Ghysels, Eric & Guay, Alain & Hall, Alastair, 1998. "Predictive tests for structural change with unknown breakpoint," Journal of Econometrics, Elsevier, Elsevier, vol. 82(2), pages 209-233, February.
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  3. Hoffman, Dennis L & Pagan, Adrian R, 1989. "Post-Sample Prediction Tests for Generalized Method of Moments Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 51(3), pages 333-43, August.
  4. Ghysels, Eric & Hall, Alastair, 1990. "A Test for Structural Stability of Euler Conditions Parameters Estimated via the Generalized Method of Moments Estimator," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 355-64, May.
  5. Fallaw Sowell, . "Tests for Violations of Moment Conditions," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 21, Carnegie Mellon University, Tepper School of Business.
  6. Fenton, Victor M & Gallant, A Ronald, 1996. "Convergence Rates of SNP Density Estimators," Econometrica, Econometric Society, Econometric Society, vol. 64(3), pages 719-27, May.
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  8. repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
  9. van der Sluis Pieter J., 1997. "EmmPack 1.01: C/C++ Code for Use with Ox for Estimation of Univariate Stochastic Volatility Models with the Efficient Method of Moments," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 2(3), pages 1-20, October.
  10. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 12(04), pages 657-681, October.
  11. Torben G. Andersen & Bent E. Sorensen, 1995. "GMM Estimation of a Stochastic Volatility Model: A Monte Carlo Study," Discussion Papers 95-19, University of Copenhagen. Department of Economics.
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  15. GHYSELS, Eric & HARVEY, Andrew & RENAULT, Eric, 1995. "Stochastic Volatility," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1995069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  20. Pieter J. van der Sluis, 1997. "Computationally Attractive Stability Tests for the Efficient Method of Moments," Tinbergen Institute Discussion Papers, Tinbergen Institute 97-087/4, Tinbergen Institute.
  21. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, Elsevier, vol. 52(1-2), pages 5-59.
  22. Nelson, Daniel B & Cao, Charles Q, 1992. "Inequality Constraints in the Univariate GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(2), pages 229-35, April.
  23. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, Elsevier, vol. 29(3), pages 229-256, September.
  24. Peter C.B. Phillips, 1982. "ERA's: A New Approach to Small Sample Theory," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 645, Cowles Foundation for Research in Economics, Yale University.
  25. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
  26. Hall, Alastair R & Sen, Amit, 1999. "Structural Stability Testing in Models Estimated by Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(3), pages 335-48, July.
  27. Gallant, A Ronald & Nychka, Douglas W, 1987. "Semi-nonparametric Maximum Likelihood Estimation," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 363-90, March.
  28. Andrews, Donald W K & Fair, Ray C, 1988. "Inference in Nonlinear Econometric Models with Structural Change," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(4), pages 615-39, October.
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Cited by:
  1. van der Sluis Pieter J., 1997. "EmmPack 1.01: C/C++ Code for Use with Ox for Estimation of Univariate Stochastic Volatility Models with the Efficient Method of Moments," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 2(3), pages 1-20, October.
  2. George J. Jiang & Pieter J. van der Sluis, 1998. "Pricing Stock Options under Stochastic Volatility and Stochastic Interest Rates with Efficient Method of Moments Estimation," Tinbergen Institute Discussion Papers, Tinbergen Institute 98-067/4, Tinbergen Institute.

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