This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Specification testing in discretized diffusion models: Theory and practice

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Gao, jiti
Casas, isabel

Additional information is available for the following registered author(s):

Abstract

We propose two newtests for the specification of both the drift and the diffusion functions in a discretized version of a semiparametric continuous-time financial econometric model. Theoretically, we establish some asymptotic consistency results for the proposed tests. Practically, a simple selection procedure for the bandwidth parameter involved in each of the proposed tests is established based on the assessment of the power function of the test under study. To the best of our knowledge, this is the first approach of his kind in specification of continuous-time financial econometrics. The proposed theory is supported by good small and medium-sample studies.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.

File URL: http://mpra.ub.uni-muenchen.de/11980/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11980.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Nov 2006
Date of revision: Aug 2007
Publication status: Published in Journal of Econometrics 1.147(2008): pp. 131-140
Handle: RePEc:pra:mprapa:11980

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: Continuous-time diffusion process; kernel method; nonparametric testing; power function; size function; time series econometrics;

Other versions of this item:

Find related papers by JEL classification:
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

References listed on IDEAS
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.:

  1. Yacine Aït-Sahalia, 1999. "Transition Densities for Interest Rate and Other Nonlinear Diffusions," Journal of Finance, American Finance Association, vol. 54(4), pages 1361-1395, 08. [Downloadable!] (restricted)
  2. Ait-Sahalia, Yacine, 1996. "Nonparametric Pricing of Interest Rate Derivative Securities," Econometrica, Econometric Society, vol. 64(3), pages 527-60, May. [Downloadable!] (restricted)
    Other versions:
  3. Manuel Arapis & Jiti Gao, 2006. "Empirical Comparisons in Short-Term Interest Rate Models Using Nonparametric Methods," Journal of Financial Econometrics, Oxford University Press, vol. 4(2), pages 310-345. [Downloadable!] (restricted)
    Other versions:
  4. Dennis Kristensen, 2004. "Estimation in Two Classes of Semiparametric Diffusion Models," FMG Discussion Papers dp500, Financial Markets Group. [Downloadable!] (restricted)
  5. Li, Fuchun, 2007. "Testing The Parametric Specification Of The Diffusion Function In A Diffusion Process," Econometric Theory, Cambridge University Press, vol. 23(02), pages 221-250, April. [Downloadable!]
  6. John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December. [Downloadable!] (restricted)
  7. Yanqin Fan & Oliver Linton, 1997. "Some Higher Order Theory for a Consistent Nonparametric Model Specification Test," Cowles Foundation Discussion Papers 1148, Cowles Foundation, Yale University. [Downloadable!]
  8. Li, Qi, 1999. "Consistent model specification tests for time series econometric models," Journal of Econometrics, Elsevier, vol. 92(1), pages 101-147, September. [Downloadable!] (restricted)
  9. Fan, Yanqin & Li, Qi, 1996. "Consistent Model Specification Tests: Omitted Variables and Semiparametric Functional Forms," Econometrica, Econometric Society, vol. 64(4), pages 865-90, July. [Downloadable!] (restricted)
  10. Nicolau, Jo o, 2003. "Bias Reduction In Nonparametric Diffusion Coefficient Estimation," Econometric Theory, Cambridge University Press, vol. 19(05), pages 754-777, October. [Downloadable!]
Full references

Statistics
Access and download statistics

Did you know? The most prolific authors have over 700 items listed on IDEAS.

This page was last updated on 2009-11-30.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.