A test for the presence of conditional heteroskedasticity within arch-m framework

Anil K. Bera, Sungsup Ra

Research output: Contribution to journalArticle

Abstract

This paper is concerned with testing the presence of ARCH within the ARCH-M model as the alternative hypothesis. Standard testing procedures are inapplicable since a nuisance parameter is unidentified under the null hypothesis. Nonetheless, the diagnostic tests for the presence of the conditional variance is very important since any misspecification in the conditional variance equation leads to inconsistent estimates of the conditional mean parameters. To resolve the problem of unidentified nuisance parameter, we apply Davies’ approach, and investigate its finite sample performance through a Monte Carlo study.

Original languageEnglish (US)
Pages (from-to)473-485
Number of pages13
JournalEconometric Reviews
Volume14
Issue number4
DOIs
StatePublished - Jan 1 1995

Keywords

  • ARCH ARCH-M Davies
  • test LM test non-standard problem

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'A test for the presence of conditional heteroskedasticity within arch-m framework'. Together they form a unique fingerprint.

  • Cite this