25. oktober 2016

Rasmus Søndergaard Pedersen publishes article in Journal of Econometrics

"Inference and testing on the boundary in extended constant conditional correlation GARCH models"

We consider inference and testing in extended constant conditional correlation GARCH models in the case where the true parameter vector is a boundary point of the parameter space. This is of particular importance when testing for volatility spillovers in the model.

The large-sample properties of the QMLE are derived together with the limiting distributions of the related LR, Wald, and score statistics. Due to the boundary problem, these large-sample properties become nonstandard. The size and power properties of the tests are investigated in a simulation study. As an empirical illustration we test for (no) volatility spillovers between foreign exchange rates.

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