REGRESSION-BASED TESTS FOR PERSISTANCE IN CONDITIONAL VARIANCES
Paper number: 95/01
Paper date: February 1995
Paper Category: Discussion Paper
Department of Economics, University of Bristol, U.K.
University of Exeter
This paper considers regression-based test criteria for the hypothesis of conditional variance nonstationary in the logarithmic family of GARCH processes. The tests are based on teh ARMA representations that appropriate nonlinear transformations of GARCH-type processes admit. Simulation experiments investigate the performance of the tests in finite samples, both in the presence and absence of a structural change in the conditional variance process. The methods are also used to test the hypothesis of integration in variance for some economic time series.
- JEL Classification numbers: C12, C22.
- Keywords: Conditional Heteroscedasticity; Nonlinear GARCH; Persistence; Regime Changes; Unit Roots.
- * The Authors are grateful to G.D.A.Phillips and seminar participants at the Universities of Exeter and Warwick for helpful comments and suggestions.