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A Test for Time-Varying Smooth Transition Conditional Covariance Models in Multivariate Time Series

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  • Sanhaji Bilel

    (27081 Université Paris 8, LED , Saint-Denis, France)

Abstract

This paper introduces a novel test designed to assess the validity of time-varying smooth transition conditional covariance models. We develop a model driven by five scalar parameters in order to build the Lagrange Multiplier test within the framework of multivariate conditional heteroskedastic time series models with smooth transition functions. We detail the development of these tests, emphasizing their applicability. The methodology is scrutinized through Monte Carlo simulations, providing insights into its finite sample properties. Additionally, empirical illustrations underscore the practical relevance of the proposed tests, demonstrating their efficiency in capturing time-varying smooth transitions within financial datasets.

Suggested Citation

  • Sanhaji Bilel, 2025. "A Test for Time-Varying Smooth Transition Conditional Covariance Models in Multivariate Time Series," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 29(4), pages 425-436.
    • Handle: RePEc:bpj:sndecm:v:29:y:2025:i:4:p:425-436:n:1005
    DOI: 10.1515/snde-2023-0109
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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