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

Rasmus Søndergaard Pedersen*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

24 Citations (Scopus)

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 languageEnglish
JournalJournal of Econometrics
Volume196
Issue number1
Pages (from-to)25-36
Number of pages12
ISSN0304-4076
DOIs
Publication statusPublished - 1 Jan 2017

Keywords

  • Boundary
  • ECCC-GARCH
  • QML
  • Spillovers
  • C32
  • C51
  • C58

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