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Monitoring Constancy Of Variance In Conditionally Heteroskedastic Time Series

  • Horv th, Lajos
  • Kokoszka, Piotr
  • Zhang, Aonan
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    We propose several methods of on-line detection of a change in unconditional variance in a conditionally heteroskedastic time series. We follow the paradigm of Chu, Stinchcombe, and White (1996, Econometrica 64, 1045 1065) in which the first m observations are assumed to follow a stationary process and the monitoring scheme has asymptotically controlled probability of falsely rejecting the null hypothesis of no change. Our theory is applicable to broad classes of GARCH-type time series and relies on a strong invariance principle that holds for the squares of observations generated by such models. Practical implementation of the procedures, which uses a bandwidth selection procedure of Andrews (1991, Econometrica 59, 817 858), is proposed, and the performance of the methods is investigated by a simulation study.This research was partially supported by NSF grants INT-0223262 and DMS-0413653 and NATO grant PST.EAP.CLG 980599.

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    Article provided by Cambridge University Press in its journal Econometric Theory.

    Volume (Year): 22 (2006)
    Issue (Month): 03 (June)
    Pages: 373-402

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    Handle: RePEc:cup:etheor:v:22:y:2006:i:03:p:373-402_06
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