Evaluating GARCH models

Stefan Lundbergh () and Timo Teräsvirta
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Stefan Lundbergh: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

No 292, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper a unified framework for testing the adequacy of an estimated GARCH model is presented. Parametric LM or LM type tests of no ARCH in standardized errors, linearity, and parameter constancy are proposed. The asymptotic null distributions of the tests are standard, which makes application easy. Versions of the tests that are robust against nonnormal errors are provided. The finite sample properties of the test statistics are investigated by simulation. The robust tests prove superior to the nonrobust ones when the errors are nonnormal. They also compare favourably in terms of power with misspecification tests previously proposed in the literature.

Keywords: Conditional heteroskedasticity; model misspecification test; nonlinear time series; parameter constancy; smooth transition GARCH. (search for similar items in EconPapers)
JEL-codes: C22 C52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1998-12-18, Revised 2001-10-09
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: This is the final revised version (October 2001) of the original (December 1998) paper.
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Citations: View citations in EconPapers (2)

Published in Journal of Econometrics, 2002, pages 417-435.

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Related works:
Journal Article: Evaluating GARCH models (2002)
Working Paper: Evaluating GARCH Models (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0292

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