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Consistency tests for heteroskedastic and risk models

Author

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  • Adián R. Pagan

    (University of Rochester)

  • Hernán Sabau

    (Operadora de Bolsa)

Abstract

This paper considers a class of consistency tests for the specification of heteroskedastic and risk models. The tests are related to other procedures such as the conditional moment tests of Newey and Tauchen, Hausman's tests, White's tests, the variable addtion Lagrange multiplier tests of Engle and Pagan, and the residual analysis of Pagan and Hall. The power of the consistency tests in the presence of local departures is analyzed and the risk premia model of Engle, Lilien and Robins is re-assessed.

Suggested Citation

  • Adián R. Pagan & Hernán Sabau, 1992. "Consistency tests for heteroskedastic and risk models," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 7(1), pages 3-30.
    • Handle: RePEc:emx:esteco:v:7:y:1992:i:1:p:3-30
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    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/307/310
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    References listed on IDEAS

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    2. Lim, G.C., 2005. "Currency risk in excess equity returns: a multi time-varying beta approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(3), pages 189-207, July.
    3. Athanassiou, Emmanuel & Kollias, Christos & Syriopoulos, Theodore, 2006. "Dynamic volatility and external security related shocks: The case of the Athens Stock Exchange," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(5), pages 411-424, December.
    4. Torben G. Andersen & Tim Bollerslev, 1997. "Answering the Critics: Yes, ARCH Models Do Provide Good Volatility Forecasts," NBER Working Papers 6023, National Bureau of Economic Research, Inc.
    5. Ólan T. Henry & Nilss Olekalns, 2002. "The Effect of Recessions on the Relationship between Output Variability and Growth," Southern Economic Journal, John Wiley & Sons, vol. 68(3), pages 683-692, January.
    6. Apergis, Nicholas, 2004. "Inflation, output growth, volatility and causality: evidence from panel data and the G7 countries," Economics Letters, Elsevier, vol. 83(2), pages 185-191, May.
    7. Ólan T. Henry & Michael McKenzie, 2006. "The Impact of Short Selling on the Price-Volume Relationship: Evidence from Hong Kong," The Journal of Business, University of Chicago Press, vol. 79(2), pages 671-692, March.
    8. Dean, Warren G. & Faff, Robert W. & Loudon, Geoffrey F., 2010. "Asymmetry in return and volatility spillover between equity and bond markets in Australia," Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 272-289, June.
    9. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May.
    10. Paul D. McNelis & Carrie K.C. Chan, 2004. "Deflationary Dynamics in Hong Kong: Evidence from Linear and Neural Network Regime Switching Models," Working Papers 212004, Hong Kong Institute for Monetary Research.

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