Testing for causality in variance in the presence of breaks

Dick van Dijk, Denise Osborn and Marianne Sensier ()

No EI 2004-48, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: We examine the size properties of tests for causality in variance in the presence of structural breaks in volatility. Extensive Monte Carlo simulations demonstrate that these tests suffer from severe size distortions when such breaks are not taken into account. Pre-testing the series for structural changes in volatility is shown to largely remedy the problem.

Keywords: causality tests; structural change; volatitilty (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2004-11-05
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Related works:
Journal Article: Testing for causality in variance in the presence of breaks (2005)
Working Paper: Testing for causality in variance in the presence of breaks (2004)
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