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Sign-based portmanteau test for ARCH-type models with heavy-tailed innovations

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  • Chen, Min
  • Zhu, Ke
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Abstract

This paper proposes a sign-based portmanteau test for diagnostic checking of ARCH-type models estimated by the least absolute deviation approach. Under the strict stationarity condition, the asymptotic distribution is obtained. The new test is applicable for very heavy-tailed innovations with only finite fractional moments. Simulations are undertaken to assess the performance of the sign-based test, as well as a comparison with other two portmanteau tests. A real empirical example for exchange rates is given to illustrate the practical usefulness of the test.

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File URL: http://mpra.ub.uni-muenchen.de/50487/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50487.

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Date of creation: 08 Oct 2013
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Handle: RePEc:pra:mprapa:50487

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Keywords: ARCH-type model; heavy-tailed innovation; LAD estimator; model diagnostics; sign-based portmanteau test;

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  1. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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  12. Linton, Oliver & Pan, Jiazhu & Wang, Hui, 2010. "Estimation For A Nonstationary Semi-Strong Garch(1,1) Model With Heavy-Tailed Errors," Econometric Theory, Cambridge University Press, vol. 26(01), pages 1-28, February.
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