Bootstrapping autoregressions with conditional heteroskedasticity of unknown form

Silvia Goncalves () and Lutz Kilian

No 196, Working Paper Series from European Central Bank

Abstract: Conditional heteroskedasticity is an important feature of many macroeconomic and financial time series. Standard residual-based bootstrap procedures for dynamic regression models treat the regression eroor as i.i.d. These procedures are invalid in the presence of conditional heteroskedasticity. We establish the asymptotic validity of three easy-to-implement alternative bootstrap proposals for stationary autoregressive processes with m.d.s. errors subject to possible conditional heteroskedasticity of unknown form. These proposals are the fixed-design wild bootstrap, the recursive design wild bootstrap and the pairwise bootstrap. In a simulation study all three procedures tend to be more accurate in small samples than the conventional large-sample approximation based on robust standard errors. In contrast, standard residual-based bootstrap methods for models with i.i.d. errors may be very inaccurate if the i.i.d. assumption is violated. We conclude that in many empirical applications the proposed robust bootstrap procedures should routinely replace conventional bootstrap procedures based on the i.i.d. error assumption. JEL Classification: C15, C22, C52

Keywords: GARCH; pairwise bootstrap; robust inference; stochastic volatility; wild bootstrap (search for similar items in EconPapers)
Date: 2002-11
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Bootstrapping autoregressions with conditional heteroskedasticity of unknown form (2004)
Working Paper: Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form (2003)
Working Paper: Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form (2003)
Working Paper: Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form (2003)
Working Paper: Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2002196

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