Simulation-Based Exact Tests with Unidentified Nuisance Parameters under the Null Hypothesis: the Case of Jumps Tests in Model with Conditional Heteroskedasticity

Lynda Khalaf, Jean-Daniel Saphores and Jean-François Bilodeau

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

We use the Monte-Carlo (MC) test technique to find valid p-values when testing for discontinuities in jump-diffusion models. While the distribution of the LR statistic for this test is typically non-standard, we show that the MC p-value is finite sample exact if no other (identified) nuisance parameter is present. Otherwise, we derive nuisance-parameter free bounds and obtain exact bounds p-values. We illustrate our approach on four classes of jump-diffusion models we use to model spot prices of copper, nickel, gold, and crude oil. We find significant jumps in all weekly time series and in a few monthly time series.

Keywords: Monte-Carlo test; bounds test; discontinuous process; conditional heteroscedasticity (search for similar items in EconPapers)
JEL-codes: C15 C22 C52 Q3 (search for similar items in EconPapers)
Date: 2000
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http://www.ecn.ulaval.ca/w3/recherche/cahiers/2000/0004.pdf (application/pdf)

Related works:
Working Paper: Simulation-Based Exact Tests with Unidentified Nuisance Parameters Under the Null Hypothesis: the Case of Jumps Tests in Models with Conditional Heteroskedasticity (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:0004

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