Additive modeling of realized variance: tests for parametric specifications and structural breaks

Matthias Fengler, Enno Mammen () and Michael Vogt ()

No 1332, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: For an additive autoregression model, we study two types of testing problems. First, a parametric specification of a component function is compared against a nonparametric fit. Second, two nonparametric fits of two different time periods are tested for equality. We apply the theory to a nonparametric extension of the linear heterogeneous autoregressive (HAR) model. The linear HAR model is widely employed to describe realized variance data. We find that the linearity assumption is often rejected, in particular on equity, fixed income, and currency futures data; in the presence of a structural break, nonlinearity appears to prevail on the sample before the outbreak of the financial crisis in mid-2007.

Keywords: Additive models; Backfitting; Nonparametric time series analysis; Specification tests; Realized variance; Heterogeneous autoregressive model. (search for similar items in EconPapers)
JEL-codes: C14 C58 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2013:32

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