Estimation and testing of dynamic models with generalised hyperbolic innovations
AbstractWe analyse the Generalised Hyperbolic distribution as a model for fat tails and asymmetries in multivariate conditionally heteroskedastic dynamic regression models. We provide a standardised version of this distribution, obtain analytical expressions for the log-likelihood score, and explain how to evaluate the information matrix. In addition, we derive tests for the null hypotheses of multivariate normal and Student t innovations, and decompose them into skewness and kurtosis components, from which we obtain more powerful one-sided versions. Finally, we present an empirical illustration with UK sectorial stock returns, which suggests that their conditional distribution is asymmetric and leptokurtic.
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 London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 24742.
Length: 40 pages
Date of creation: Jun 2004
Date of revision:
Inequality constraints; Kurtosis; Multivariate normality test; Skewness; Student t; Tail dependence;
Other versions of this item:
- Francisco Javier Mencía & Enrique Sentana, 2004. "Estimation And Testing Of Dynamic Models With Generalised Hyperbolic Innovations," Working Papers wp2004_0411, CEMFI.
- Enrique Sentana, 2004. "Estimation and Testing of Dynamic Models with Generalised Hyperbolic Innovations," FMG Discussion Papers dp502, Financial Markets Group.
- Mencía, Javier & Sentana, Enrique, 2005. "Estimation and Testing of Dynamic Models with Generalized Hyperbolic Innovations," CEPR Discussion Papers 5177, C.E.P.R. Discussion Papers.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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.:
- repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
- Christian Bontemps & Nour Meddahi, 2002.
"Testing Normality: A GMM Approach,"
CIRANO Working Papers
- Andrews, Donald W K, 2001.
"Testing When a Parameter Is on the Boundary of the Maintained Hypothesis,"
Econometric Society, vol. 69(3), pages 683-734, May.
- Donald W.K. Andrews, 1999. "Testing When a Parameter Is on the Boundary of the Maintained Hypothesis," Cowles Foundation Discussion Papers 1229, Cowles Foundation for Research in Economics, Yale University.
- Lee, Lung-Fei & Chesher, Andrew, 1986. "Specification testing when score test statistics are identically zero," Journal of Econometrics, Elsevier, vol. 31(2), pages 121-149, March.
- Anders Eriksson & Lars Forsberg & Eric Ghysels, 2004.
"Approximating the Probability Distribution of Functions of Random Variables: A New Approach,"
CIRANO Working Papers
- Eric Ghysels & Anders Eriksson Lars Forsberg, 2004. "Approximating the probability distribution of functions of random variables: A new approach," Econometric Society 2004 Far Eastern Meetings 503, Econometric Society.
- Jan R. MAGNUS, 1986. "The Exact Moments of a Ratio of Quadratic Forms in Normal Variables," Annales d'Economie et de Statistique, ENSAE, issue 4, pages 95-109.
- Luc Bauwens & Sébastien Laurent, 2002.
"A New Class of Multivariate skew Densities, with Application to GARCH Models,"
Computing in Economics and Finance 2002
5, Society for Computational Economics.
- BAUWENS, Luc & LAURENT, Sébastien, 2002. "A new class of multivariate skew densities, with application to GARCH models," CORE Discussion Papers 2002020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tauchen, George E. & Gallant, A. Ronald, 1995.
"Which Moments to Match,"
95-20, Duke University, Department of Economics.
- Davidson, Russel & MacKinnon, James G., 1983.
"Small sample properties of alternative forms of the Lagrange Multiplier test,"
Elsevier, vol. 12(3-4), pages 269-275.
- Russell Davidson & James G. MacKinnon, 1981. "Small Sample Properties of Alternative Forms of the Lagrange Multiplier Test," Working Papers 439, Queen's University, Department of Economics.
- Whitney K. Newey & Douglas G. Steigerwald, 1997. "Asymptotic Bias for Quasi-Maximum-Likelihood Estimators in Conditional Heteroskedasticity Models," Econometrica, Econometric Society, vol. 65(3), pages 587-600, May.
- Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
- Demos, Antonis & Sentana, Enrique, 1998. "Testing for GARCH effects: a one-sided approach," Journal of Econometrics, Elsevier, vol. 86(1), pages 97-127, June.
- Fiorentini, Gabriele & Sentana, Enrique & Calzolari, Giorgio, 2003. "Maximum Likelihood Estimation and Inference in Multivariate Conditionally Heteroscedastic Dynamic Regression Models with Student t Innovations," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 532-46, October.
- H. D. Vinod & B. D. McCullough, 1999. "The Numerical Reliability of Econometric Software," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 633-665, June.
- Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
- Hansen, Bruce E, 1994.
"Autoregressive Conditional Density Estimation,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 705-30, August.
- Tom Doan, . "RATS programs to replicate Hansen's GARCH models with time-varying t-densities," Statistical Software Components RTZ00086, Boston College Department of Economics.
- Hansen, B.E., 1992. "Autoregressive Conditional Density Estimation," RCER Working Papers 322, University of Rochester - Center for Economic Research (RCER).
- Jurgen A. Doornik & Henrik Hansen, 2008.
"An Omnibus Test for Univariate and Multivariate Normality,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 70(s1), pages 927-939, December.
- Jurgen A Doornik & Henrik Hansen, . "An omnibus test for univariate and multivariate normalit," Economics Papers W4&91., Economics Group, Nuffield College, University of Oxford.
- Magnus, J.R., 1986. "The exact moments of a ratio of quadratic forms in normal variables," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153219, Tilburg University.
- Fiorentini, Gabriele & Sentana, Enrique & Calzolari, Giorgio, 2004. "On the validity of the Jarque-Bera normality test in conditionally heteroskedastic dynamic regression models," Economics Letters, Elsevier, vol. 83(3), pages 307-312, June.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
- Kilian, Lutz & Demiroglu, Ufuk, 2000. "Residual-Based Tests for Normality in Autoregressions: Asymptotic Theory and Simulation Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 40-50, January.
- H. D. Vinod & B. D. McCullough, 1999. "Corrigenda: The Numerical Reliability of Econometric Software," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1565-1565, December.
- Sargan, J D, 1983. "Identification and Lack of Identification," Econometrica, Econometric Society, vol. 51(6), pages 1605-33, November.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lucy Ayre).
If references are entirely missing, you can add them using this form.