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A test for multivariate ARCH effects

Hacker, RS and Hatemi-J, Abdulnasser LU (2005) In Applied Economics Letters 12(7). p.411-417
Abstract
This paper extends Engle's LM test for ARCH affects to multivariate cases. The size and power properties of this multivariate test for ARCH effects in VAR models are investigated based on asymptotic and bootstrap distributions. Using the asymptotic distribution, deviations of actual size from nominal size do not appear to be very excessive. Nevertheless, there is a tendency for the actual size to overreject the null hypothesis when the nominal size is I % and underreject the null when the nominal size is 5% or 10%. It is found that using a bootstrap distribution for the multivariate LM test is generally superior in achieving the appropriate size to using the asymptotic distribution when (1) the nominal size is 5%; (2) the sample size is... (More)
This paper extends Engle's LM test for ARCH affects to multivariate cases. The size and power properties of this multivariate test for ARCH effects in VAR models are investigated based on asymptotic and bootstrap distributions. Using the asymptotic distribution, deviations of actual size from nominal size do not appear to be very excessive. Nevertheless, there is a tendency for the actual size to overreject the null hypothesis when the nominal size is I % and underreject the null when the nominal size is 5% or 10%. It is found that using a bootstrap distribution for the multivariate LM test is generally superior in achieving the appropriate size to using the asymptotic distribution when (1) the nominal size is 5%; (2) the sample size is small (40 observations) and/or the VAR system is stable. With a small sample, the power of the test using the bootstrap distribution also appears better at the 5% nominal size. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Applied Economics Letters
volume
12
issue
7
pages
411 - 417
publisher
Routledge
external identifiers
  • wos:000230307100005
  • scopus:22144437066
ISSN
1466-4291
DOI
10.1080/13504850500092129
language
English
LU publication?
yes
id
0bfbcc72-c938-426a-886f-8fa7bdcbee00 (old id 895110)
date added to LUP
2008-01-16 10:00:16
date last changed
2017-04-09 03:29:29
@article{0bfbcc72-c938-426a-886f-8fa7bdcbee00,
  abstract     = {This paper extends Engle's LM test for ARCH affects to multivariate cases. The size and power properties of this multivariate test for ARCH effects in VAR models are investigated based on asymptotic and bootstrap distributions. Using the asymptotic distribution, deviations of actual size from nominal size do not appear to be very excessive. Nevertheless, there is a tendency for the actual size to overreject the null hypothesis when the nominal size is I % and underreject the null when the nominal size is 5% or 10%. It is found that using a bootstrap distribution for the multivariate LM test is generally superior in achieving the appropriate size to using the asymptotic distribution when (1) the nominal size is 5%; (2) the sample size is small (40 observations) and/or the VAR system is stable. With a small sample, the power of the test using the bootstrap distribution also appears better at the 5% nominal size.},
  author       = {Hacker, RS and Hatemi-J, Abdulnasser},
  issn         = {1466-4291},
  language     = {eng},
  number       = {7},
  pages        = {411--417},
  publisher    = {Routledge},
  series       = {Applied Economics Letters},
  title        = {A test for multivariate ARCH effects},
  url          = {http://dx.doi.org/10.1080/13504850500092129},
  volume       = {12},
  year         = {2005},
}