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Specification tests of parametric dynamic conditional quantiles

  • J. Carlos Escanciano

    ()

    (Economics Department - Indiana University)

  • Carlos Velasco

    ()

    (Departamento de Economía. Universidad Carlos III de Madrid. Calle Madrid 126 - Departamento de Economía. Universidad Carlos III de Madrid. Calle Madrid 126)

This article proposes omnibus specification tests of parametric dynamic quantile models. Contrary to the existing procedures, we allow for a flexible specification, where a possibly continuum of quantiles are simultaneously specified under fairly weak conditions on the serial dependence in the underlying data generating process. Since the null limit distribution of tests is not pivotal, we propose a subsampling approximation of the asymptotic critical values. A Monte Carlo study shows that the asymptotic results provide good approximations for small sample sizes. Finally, an application suggests that our methodology is a powerful alternative to standard backtesting procedures in evaluating market risk.

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Paper provided by HAL in its series Post-Print with number hal-00732534.

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Date of creation: 15 Sep 2010
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Publication status: Published, Journal of Econometrics, 2010, 159, 1, 209
Handle: RePEc:hal:journl:hal-00732534
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