DIAGNOSTIC TEST FOR GARCH MODELS BASED ON ABSOLUTE RESIDUAL AUTOCORRELATIONS

Farhat Iqbal

Abstract


In this paper the asymptotic distribution of the absolute residual autocorrelations from generalized autoregressive conditional heteroscedastic (GARCH) models is derived. The correct asymptotic standard errors for the absolute residual autocorrelations are also obtained and based on these results, a diagnostic test for checking the adequacy of GARCH-type models are developed. Our results do not depend on the existence of higher moments and is therefore robust under heavy-tailed distributions.


Keywords


GARCH, Diagnostic test, Residual autocorrelations

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DOI: http://dx.doi.org/10.18187/pjsor.v9i2.612

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Title

DIAGNOSTIC TEST FOR GARCH MODELS BASED ON ABSOLUTE RESIDUAL AUTOCORRELATIONS

Keywords

GARCH, Diagnostic test, Residual autocorrelations

Description

In this paper the asymptotic distribution of the absolute residual autocorrelations from generalized autoregressive conditional heteroscedastic (GARCH) models is derived. The correct asymptotic standard errors for the absolute residual autocorrelations are also obtained and based on these results, a diagnostic test for checking the adequacy of GARCH-type models are developed. Our results do not depend on the existence of higher moments and is therefore robust under heavy-tailed distributions.


Date

2013-10-21

Identifier


Source

Pakistan Journal of Statistics and Operation Research; Vol. 9 No. 2, 2013



Print ISSN: 1816-2711 | Electronic ISSN: 2220-5810