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Joint Diagnostic Tests for Conditional Mean and Variance Specifications

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  • Juan Carlos Escanciano

    (School of Economics and Business Administration, University of Navarra)

Abstract

This article proposes a general class of joint diagnostic tests for parametric conditional mean and variance models of possibly nonlinear and/or non-Markovian time series sequences. The new tests are based on a generalized spectral approach and, contrary to existing procedures, they do not need to choose a lag order depending on the sample size or to smooth the data. Moreover, they are robust to higher order dependence of unknown form. It turns out that the asymptotic null distributions of the new tests depend on the data generating process, so a bootstrap procedure is proposed and theoretically justified. A simulation study compares the finite sample performance of the proposed and competing tests and shows that our tests can play a valuable role in time series modelling. An application to the S&P500 highlights the merits of our approach.

Suggested Citation

  • Juan Carlos Escanciano, 2006. "Joint Diagnostic Tests for Conditional Mean and Variance Specifications," Faculty Working Papers 02/06, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp0206
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    File URL: http://www.unav.edu/documents/10174/6546776/1142591760_wp0206.pdf
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    References listed on IDEAS

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    2. Li, Qi, 1999. "Consistent model specification tests for time series econometric models," Journal of Econometrics, Elsevier, vol. 92(1), pages 101-147, September.
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    11. Jondeau, Eric & Rockinger, Michael, 2003. "Conditional volatility, skewness, and kurtosis: existence, persistence, and comovements," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1699-1737, August.
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    14. Juan Carlos Escanciano, 2004. "Model Checks Using Residual Marked Empirical Processes," Faculty Working Papers 13/04, School of Economics and Business Administration, University of Navarra.
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    Cited by:

    1. Song Xi Chen & Jiti Gao, 2010. "Simultaneous Testing of Mean and Variance Structures in Nonlinear Time Series Models," School of Economics and Public Policy Working Papers 2010-28, University of Adelaide, School of Economics and Public Policy.

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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