Improved two-component tests in Beta-Skew-t-EGARCH models

Fernanda Müller () and Fábio Bayer ()
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Fernanda Müller: Federal University of Rio Grande do Sul
Fábio Bayer: Federal University of Santa Maria

Economics Bulletin, 2017, vol. 37, issue 4, 2364-2373

Abstract: This work proposes a likelihood ratio test to assist in the selection of the Beta-Skew-t-EGARCH model with one or two volatility components. To improve the performance of the proposed test in small samples, the bootstrap-based likelihood ratio test and the bootstrap Bartlett correction are considered. The finite sample performance of the tests are assessed using Monte Carlo simulations. The numerical evidence favors the bootstrap-based test. The tests are applied to the DAX log-returns. The results demonstrate the practical usefulness of the proposed two-component tests.

Keywords: Beta-Skew-t-EGARCH; bootstrap-based test; bootstrap Bartlett correction; likelihood ratio test; two-component test; volatility. (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2017-10-26
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Citations: View citations in EconPapers (4)

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