A GMM Skewness and Kurtosis Ratio Test for Higher Moment Dependence

Woon Wong ()

No E2016/8, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: TThis article extends the variance ratio test of Lo and MacKinlay (1988) to tests of skewness and kurtosis ratios using the generalized methods of moments. In particular, overlapping observations are used in which dependencies are explicitly modelled so that more information can be used to make the tests more powerful and have better size properties. The proposed tests can be useful in risk management where risk models are estimated using daily data but multiperiod forecasts of tail risks are required for the determination of risk capital. Application of the tests finds significant higher moment dependence in the US stock markets.

Keywords: Skewness; kurtosis; overlapping observations; moments; cumulants (search for similar items in EconPapers)
JEL-codes: C10 G11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2016-08
New Economics Papers: this item is included in nep-ecm and nep-rmg
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