Misspeciﬁcation Testing in GARCH-MIDAS Models
Christian Conrad () and
No 597, Working Papers from University of Heidelberg, Department of Economics
We develop a misspeciﬁcation test for the multiplicative two-component GARCH-MIDAS model suggested in Engle et al. (2013). In the GARCH-MIDAS model a short-term unit variance GARCH component ﬂuctuates around a smoothly time-varying long-term component which is driven by the dynamics of an explanatory variable. We suggest a Lagrange Multiplier statistic for testing the null hypothesis that the variable has no explanatory power. Hence, under the null hypothesis the long-term component is constant and the GARCH-MIDAS reduces to the simple GARCH model. We derive the asymptotic theory for our test statistic and investigate its ﬁnite sample properties by Monte-Carlo simulation. The usefulness of our procedure is illustrated by an empirical application to S&P 500 return data.
Keywords: Volatility Component Models; LM test; Long-term Volatility. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://nbn-resolving.de/urn/resolver.pl?urn=urn:nbn:de:bsz:16-heidok-190061 Frontdoor page on HeiDOK (text/html)
http://archiv.ub.uni-heidelberg.de/volltextserver/ ... ienle_2015_dp597.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:awi:wpaper:0597
Access Statistics for this paper
More papers in Working Papers from University of Heidelberg, Department of Economics Contact information at EDIRC.
Series data maintained by Gabi Rauscher (). This e-mail address is bad, please contact .