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Evaluating GARCH Models

Author

Listed:
  • Stefan Lundbergh

    (Stockholm School of Economics)

  • Timo Teräsvirta

    () (Stockholm School of Economics)

Abstract

This paper suggests a unified framework for testing the adequacy of anestimated GARCH model. Nothing more complicated than standard asymptotictheory is required. Parametric tests of no ARCH in standardized errors,symmetry, and parameter constancy are suggested. Estimating the alternativewhen the null hypothesis is rejected may give useful ideas of how to improvethe specification. It is also shown that the recent portmanteau test of Liand Mak (1994) is asymptotically equivalent to our test of no ARCH in thestandardized error process.

Suggested Citation

  • Stefan Lundbergh & Timo Teräsvirta, 1999. "Evaluating GARCH Models," Tinbergen Institute Discussion Papers 99-008/4, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:19990008
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    References listed on IDEAS

    as
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    4. Shinn-Juh Lin & Jian Yang, 1999. "Testing Shifts in Financial Models with Conditional Heteroskedasticity: An Empirical Distribution Function Approach," Research Paper Series 30, Quantitative Finance Research Centre, University of Technology, Sydney.
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    More about this item

    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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