Testing Garch-X Type Models
Research output: Working paper
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Testing Garch-X Type Models. / Pedersen, Rasmus Søndergaard; Rahbek, Anders.
2017.Research output: Working paper
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TY - UNPB
T1 - Testing Garch-X Type Models
AU - Pedersen, Rasmus Søndergaard
AU - Rahbek, Anders
PY - 2017
Y1 - 2017
N2 - We present novel theory for testing for reduction of GARCH-X type models with an exogenous (X) covariate to standard GARCH type models. To deal with the problems of potential nuisance parameters on the boundary of the parameter space as well as lack of identification under the null, we exploit a noticeable property of specific zero-entries in the inverse information of the GARCH-X type models. Specifically, we consider sequential testing based on two likelihood ratio tests and as demonstrated the structure of the inverse information implies that the proposed test neither depends on whether the nuisance parameters lie on the boundary of the parameter space, nor on lack of identification. Our general results on GARCH-X type models are applied to Gaussian based GARCH-X models, GARCH-X models with Student's t-distributed innovations as well as the integer-valued GARCH-X (PAR-X) models.
AB - We present novel theory for testing for reduction of GARCH-X type models with an exogenous (X) covariate to standard GARCH type models. To deal with the problems of potential nuisance parameters on the boundary of the parameter space as well as lack of identification under the null, we exploit a noticeable property of specific zero-entries in the inverse information of the GARCH-X type models. Specifically, we consider sequential testing based on two likelihood ratio tests and as demonstrated the structure of the inverse information implies that the proposed test neither depends on whether the nuisance parameters lie on the boundary of the parameter space, nor on lack of identification. Our general results on GARCH-X type models are applied to Gaussian based GARCH-X models, GARCH-X models with Student's t-distributed innovations as well as the integer-valued GARCH-X (PAR-X) models.
KW - Faculty of Social Sciences
KW - Testing on the Boundary
KW - Likelihood-Ratio Test
KW - Non-Identification
KW - GARCH-X
KW - PAR-X
KW - GARCH Models
KW - Integer-Valued
M3 - Working paper
T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)
BT - Testing Garch-X Type Models
ER -
ID: 182540556