Testing constancy of the error covariance matrix in vector models against parametric alternatives using a spectral decomposition

Yukai Yang

No 2014017, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: I consider multivariate (vector) time series models in which the error covariance matrix may be time-varying. I derive a test of constancy of the error covariance matrix against the alternative that the covariance matrix changes over time. I design a new family of Lagrange-multiplier tests against the alternative hypothesis that the innovations are time-varying according to several parametric specifications. I investigate the size and power properties of these tests and find that the test with smooth transition specification has satisfactory size properties. The tests are informative and may suggest to consider multivariate volatility modelling.

Keywords: covariance constancy; error covariance structure; Lagrange multiplier test; spectral decomposition; auxiliary regression; model misspecification; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C32 C52 (search for similar items in EconPapers)
Date: 2014-06-11
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2014.html (application/pdf)

Related works:
Working Paper: Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2014017

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS (alain.gillis@uclouvain.be).