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Change-point detection in GARCH models: asymptotic and bootstrap tests

Author

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  • KOKOSZKA, Piotr
  • TEYSSIÈRE, Gilles

Abstract

Two classes of tests designed to detect changes in volatility are proposed. Procedures based on squared model residuals and on the likelihood ratio are considered. The tests are applicable to parametric nonlinear models like GARCH. Both asymptotic and bootstrap tests are investigated by means of a simulation study and applied to returns data. The tests based onthe likelihood ratio are shown to be generally preferable. A wavelet based estimator of long memory is applied to returns data to shed light on the interplay of change points and long memory.

Suggested Citation

  • KOKOSZKA, Piotr & TEYSSIÈRE, Gilles, 2002. "Change-point detection in GARCH models: asymptotic and bootstrap tests," LIDAM Discussion Papers CORE 2002065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2002065
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2002.html
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    Citations

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    Cited by:

    1. Kirman, Alan & Teyssiere, Gilles, 2005. "Testing for bubbles and change-points," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 765-799, April.
    2. Berkes, Istvan & Horváth, Lajos & Kokoszka, Piotr, 2004. "Testing for parameter constancy in GARCH(p,q) models," Statistics & Probability Letters, Elsevier, vol. 70(4), pages 263-273, December.
    3. TEYSSIERE, Gilles, 2003. "Interaction models for common long-range dependence in asset price volatilities," LIDAM Discussion Papers CORE 2003026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Cho, Haeran & Korkas, Karolos K., 2022. "High-dimensional GARCH process segmentation with an application to Value-at-Risk," Econometrics and Statistics, Elsevier, vol. 23(C), pages 187-203.
    5. de Pooter, M.D. & van Dijk, D.J.C., 2004. "Testing for changes in volatility in heteroskedastic time series - a further examination," Econometric Institute Research Papers EI 2004-38, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.

    More about this item

    Keywords

    GARCH model; change-point; likelihood ratio; parametric bootstrap; squared residuals; size-power curves; wavelets;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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