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Residual-based diagnostic tests for noninvertible ARMA models

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  • Nyholm, Juho

Abstract

This paper proposes two residual-based diagnostic tests for noninvertible ARMA models. The tests are analogous to the portmanteau tests developed by Box and Pierce (1970), Ljung and Box (1978) and McLeod and Li (1983) in the conventional invertible case. We derive the asymptotic chi-squared distribution for the tests and study the size and power properties in a Monte Carlo simulation study. An empirical application employing financial time series data points out the usefulness of noninvertible ARMA model in analyzing stock returns and the use of the proposed test statistics.

Suggested Citation

  • Nyholm, Juho, 2017. "Residual-based diagnostic tests for noninvertible ARMA models," MPRA Paper 81033, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:81033
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    File URL: https://mpra.ub.uni-muenchen.de/81033/1/MPRA_paper_81033.pdf
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    More about this item

    Keywords

    Non-Gaussian time series; noninvertible ARMA model; model selection;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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