Department of Economics and Business Economics

Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition

Research output: Working paperResearch

Standard

Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition. / Yang, Yukay.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2014.

Research output: Working paperResearch

Harvard

APA

Yang, Y. (2014). Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition. Aarhus: Institut for Økonomi, Aarhus Universitet. CREATES Research Papers, No. 2014-11

CBE

MLA

Yang, Yukay Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition. Aarhus: Institut for Økonomi, Aarhus Universitet. (CREATES Research Papers; Journal number 2014-11). 2014., 28 p.

Vancouver

Author

Yang, Yukay. / Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition. Aarhus : Institut for Økonomi, Aarhus Universitet, 2014. (CREATES Research Papers; No. 2014-11).

Bibtex

@techreport{878ba23eac8444b9b6ba6660987995ee,
title = "Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition",
abstract = "I consider multivariate (vector) time series models in which the error covariance matrix may be time-varying. I derive a test of constancy of the error covariance matrix against the alternative that the covariance matrix changes over time. I design a new family of Lagrange-multiplier tests against the alternative hypothesis that the innovations are time-varying according to several parametric specifications. I investigate the size and power properties of these tests and find that the test with smooth transition specification has satisfactory size properties. The tests are informative and may suggest to consider multivariate volatility modelling.",
keywords = "Covariance constancy, Error covariance structure, Lagrange multiplier test, Spectral decomposition, Auxiliary regression, Model misspecification, Monte Carlo simulation, Covariance constancy, Error covariance structure, Lagrange multiplier test, spectral decomposition, Auxiliary regression, Model misspecification, Monte Carlo simulation",
author = "Yukay Yang",
year = "2014",
month = "4",
day = "8",
language = "English",
series = "CREATES Research Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2014-11",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition

AU - Yang, Yukay

PY - 2014/4/8

Y1 - 2014/4/8

N2 - I consider multivariate (vector) time series models in which the error covariance matrix may be time-varying. I derive a test of constancy of the error covariance matrix against the alternative that the covariance matrix changes over time. I design a new family of Lagrange-multiplier tests against the alternative hypothesis that the innovations are time-varying according to several parametric specifications. I investigate the size and power properties of these tests and find that the test with smooth transition specification has satisfactory size properties. The tests are informative and may suggest to consider multivariate volatility modelling.

AB - I consider multivariate (vector) time series models in which the error covariance matrix may be time-varying. I derive a test of constancy of the error covariance matrix against the alternative that the covariance matrix changes over time. I design a new family of Lagrange-multiplier tests against the alternative hypothesis that the innovations are time-varying according to several parametric specifications. I investigate the size and power properties of these tests and find that the test with smooth transition specification has satisfactory size properties. The tests are informative and may suggest to consider multivariate volatility modelling.

KW - Covariance constancy, Error covariance structure, Lagrange multiplier test, Spectral decomposition, Auxiliary regression, Model misspecification, Monte Carlo simulation

KW - Covariance constancy

KW - Error covariance structure

KW - Lagrange multiplier test

KW - spectral decomposition

KW - Auxiliary regression

KW - Model misspecification

KW - Monte Carlo simulation

M3 - Working paper

T3 - CREATES Research Papers

BT - Testing Constancy of the Error Covariance Matrix in Vector Models against Parametric Alternatives using a Spectral Decomposition

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -