Asymptotic Distribution-Free Diagnostic Tests For Heteroskedastic Time Series Models
AbstractThis article investigates model checks for a class of possibly nonlinear heteroskedastic time series models, including but not restricted to ARMA-GARCH models. We propose omnibus tests based on functionals of certain weighted standardized residual empirical processes. The new tests are asymptotically distribution-free, suitable when the conditioning set is in?nite- dimensional, and consistent against a class of Pitman?s local alternatives converging at the parametric rate n??1=2; with n the sample size. A Monte Carlo study shows that the simulated level of the proposed tests is close to the asymptotic level already for moderate sample sizes and that tests have a satisfactory power performance. Finally, we illustrate our methodology with an application to the well-known S&P 500 daily stock index. The paper also contains an asymptotic uniform expansion for weighted residual empirical processes when initial conditions are considered, a result of independent interest.
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Bibliographic InfoPaper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2009-019.
Length: 33 pages
Date of creation: Sep 2009
Date of revision:
Other versions of this item:
- Escanciano, J. Carlos, 2010. "Asymptotic Distribution-Free Diagnostic Tests For Heteroskedastic Time Series Models," Econometric Theory, Cambridge University Press, vol. 26(03), pages 744-773, June.
- NEP-ALL-2010-01-16 (All new papers)
- NEP-ECM-2010-01-16 (Econometrics)
- NEP-ETS-2010-01-16 (Econometric Time Series)
- NEP-ORE-2010-01-16 (Operations Research)
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