Evaluating GARCH models
In this paper a unified framework for testing the adequacy of an estimated GARCH model is presented. Parametric LM or LM type tests of no ARCH in standardized errors, linearity, and parameter constancy are proposed. The asymptotic null distributions of the tests are standard, which makes application easy. Versions of the tests that are robust against nonnormal errors are provided. The finite sample properties of the test statistics are investigated by simulation. The robust tests prove superior to the nonrobust ones when the errors are nonnormal. They also compare favourably in terms of power with misspecification tests previously proposed in the literature.
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|Date of creation:||18 Dec 1998|
|Date of revision:||03 Oct 2001|
|Publication status:||Published in Journal of Econometrics, 2002, pages 417-435.|
|Note:||This is the final revised version (October 2001) of the original (December 1998) paper.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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