Abstract
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.
Original language | English |
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Journal | Journal of Econometrics |
Volume | 196 |
Issue number | 1 |
Pages (from-to) | 25-36 |
Number of pages | 12 |
ISSN | 0304-4076 |
DOIs | |
Publication status | Published - 1 Jan 2017 |
Keywords
- Boundary
- ECCC-GARCH
- QML
- Spillovers
- C32
- C51
- C58