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Testing for causality in variance in the presence of breaks

Dick van Dijk (), Denise Osborn () and Marianne Sensier ()

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The Univeristy of Manchester

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.

New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2004
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Journal Article: Testing for causality in variance in the presence of breaks (2005) Downloads
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