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A test for multivariate ARCH effects

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  • R. Scott Hacker
  • Abdulnasser Hatemi-J

Abstract

This paper extends Engle's LM test for ARCH affects to multivariate cases. The size and power properties of this multivariate test for ARCH effects in VAR models are investigated based on asymptotic and bootstrap distributions. Using the asymptotic distribution, deviations of actual size from nominal size do not appear to be very excessive. Nevertheless, there is a tendency for the actual size to overreject the null hypothesis when the nominal size is 1% and underreject the null when the nominal size is 5% or 10%. It is found that using a bootstrap distribution for the multivariate LM test is generally superior in achieving the appropriate size to using the asymptotic distribution when (1) the nominal size is 5%; (2) the sample size is small (40 observations) and/or the VAR system is stable. With a small sample, the power of the test using the bootstrap distribution also appears better at the 5% nominal size.

Suggested Citation

  • R. Scott Hacker & Abdulnasser Hatemi-J, 2005. "A test for multivariate ARCH effects," Applied Economics Letters, Taylor & Francis Journals, vol. 12(7), pages 411-417.
  • Handle: RePEc:taf:apeclt:v:12:y:2005:i:7:p:411-417
    DOI: 10.1080/13504850500092129
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    References listed on IDEAS

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    1. A. Hatemi-J, 2003. "A new method to choose optimal lag order in stable and unstable VAR models," Applied Economics Letters, Taylor & Francis Journals, vol. 10(3), pages 135-137.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. Hatemi-J, Abdulnasser, 2004. "Multivariate tests for autocorrelation in the stable and unstable VAR models," Economic Modelling, Elsevier, vol. 21(4), pages 661-683, July.
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    Cited by:

    1. Tsung-pao Wu & Dian Fan & Tsangyao Chang, 2016. "The Relationship Between Globalization And Military Expenditures In G7 Countries: Evidence From A Panel Data Analysis," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(3), pages 285-302.
    2. Chang, Tsangyao & Cheng, Shu-Ching & Pan, Guochen & Wu, Tsung-pao, 2013. "Does globalization affect the insurance markets? Bootstrap panel Granger causality test," Economic Modelling, Elsevier, vol. 33(C), pages 254-260.
    3. Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2012. "Purchasing Power Parity between the UK and the Euro Area," Working papers 2012-46, University of Connecticut, Department of Economics.
    4. repec:eee:riibaf:v:41:y:2017:i:c:p:547-555 is not listed on IDEAS
    5. Scott Hacker & Abdulnasser Hatemi-J, 2012. "A bootstrap test for causality with endogenous lag length choice: theory and application in finance," Journal of Economic Studies, Emerald Group Publishing, vol. 39(2), pages 144-160, May.
    6. Abdulnasser Hatemi-J & Eduardo Roca, 2005. "Exchange rates and stock prices interaction during good and bad times: evidence from the ASEAN4 countries," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 539-546.
    7. Hatemi-J, Abdulnasser & Roca, Eduardo, 2006. "A re-examination of international portfolio diversification based on evidence from leveraged bootstrap methods," Economic Modelling, Elsevier, vol. 23(6), pages 993-1007, December.
    8. Ali Koçyigit & Mustafa Ercan Kiliç & Tayfur Bayat, 2015. "A Causality Test on the Gibson Paradox in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(10), pages 1134-1147, October.
    9. Ming Zhong & Tsangyao Chang & Samrat Goswami & Rangan Gupta, 2014. "The Nexus between Military Expenditures and Economic Growth in the BRICS and the US: A Bootstrap Panel Causality Test," Working Papers 201449, University of Pretoria, Department of Economics.
    10. Al Shayeb, Abdulrahman & Hatemi-J , Abdulnasser, 2013. "An Empirical Investigation of the Potential Asymmetric Relationship between the Stock Market and the Exchange Rates in the UAE - Un esame empirico della potenziale relazione asimmetrica tra mercato az," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 66(4), pages 425-438.
    11. Chen, Sen-Sung & Cheng, Shu-Ching & Pan, Guochen & Wu, Tsung-Pao, 2013. "The relationship between globalization and insurance activities: A panel data analysis," Japan and the World Economy, Elsevier, vol. 28(C), pages 151-157.
    12. Martin T. Bohl & Christian Gross & Waldemar Souza, 2016. "The Role of Emerging Economies in the Global Price Formation Process of Commodities: Evidence from Brazilian and U.S. Coffee Markets," CQE Working Papers 5116, Center for Quantitative Economics (CQE), University of Muenster.
    13. Degiannakis, Stavros & Filis, George & Floros, Christos, 2013. "Oil and stock price returns: Evidence from European industrial sector indices in a time-varying environment," MPRA Paper 80495, University Library of Munich, Germany.
    14. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
    15. Degiannakis, Stavros & Filis, George & Floros, Christos, 2013. "Oil and stock returns: Evidence from European industrial sector indices in a time-varying environment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 175-191.
    16. Lokman Gunduz & Abdulnasser Hatemi-J, 2005. "Is the tourism-led growth hypothesis valid for Turkey?," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 499-504.

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    1. بحث کاربر:Armin.ashoury in Wikipedia Persian ne '')
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    3. واریانس ناهمسانی شرطی اتورگرسیو in Wikipedia Persian ne '')

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