Power monotonicity in detecting volatility levels change

We show that the CUSUM and LM tests for structural change in the volatility process enjoy monotonic power. The framework is general including many recently proposed non-stationary GARCH-type models. The result is in contrast to the well-known issue of non-monotonic power for the CUSUM-based tests for changing mean. Simulations and an empirical example provide further support.

MoreLess

Year of publication:	2013
Authors:	Xu, Ke-Li
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 121.2013, 1, p. 64-69
Publisher:	Elsevier
Subject:	CUSUM test \| IGARCH effect \| LM test \| Non-monotonic power \| Structural change \| Volatility models

More details

Type of publication:	Article
Classification:	C12 - Hypothesis Testing ; C22 - Time-Series Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010702780