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Testing for ARCH in ARCH-in-Mean Model

Author

Listed:
  • Param Silvapulle

    (School of Economics, La Trobe University)

  • Mervyn J Silvapulle

    (School of Economics, La Trobe University)

  • A B M Rabiul Alam Beg

    (School of Economics, La Trobe University)

Abstract

An issue that arises in applications involving the ARCH-in-Mean (ARCH-M) model is whether or not the error variance is constant over time. A proper statistical formulation of this as a test of hypothesis presents two difficulties. First, the model does not satisfy the standard regularity conditions because a nuisance parameter becomes unidentified under the null hypothesis and consequently the usual tests, such as the Lagrange Multiplier test, and their distribution theory require modification.

Suggested Citation

  • Param Silvapulle & Mervyn J Silvapulle & A B M Rabiul Alam Beg, 1997. "Testing for ARCH in ARCH-in-Mean Model," Working Papers 1997.24, School of Economics, La Trobe University.
    • Handle: RePEc:trb:wpaper:1997.24
    as

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    Keywords

    Models; Testing;

    Statistics

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