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Sign-based portmanteau test for ARCH-type models with heavy-tailed innovations

Author

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  • Chen, Min
  • Zhu, Ke

Abstract

This paper proposes a sign-based portmanteau test for diagnostic checking of ARCH-type models estimated by the least absolute deviation approach. Under the strict stationarity condition, the asymptotic distribution is obtained. The new test is applicable for very heavy-tailed innovations with only finite fractional moments. Simulations are undertaken to assess the performance of the sign-based test, as well as a comparison with other two portmanteau tests. A real empirical example for exchange rates is given to illustrate the practical usefulness of the test.

Suggested Citation

  • Chen, Min & Zhu, Ke, 2013. "Sign-based portmanteau test for ARCH-type models with heavy-tailed innovations," MPRA Paper 50487, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:50487
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    File URL: https://mpra.ub.uni-muenchen.de/50487/1/MPRA_paper_50487.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Zhu, Ke & Li, Wai Keung, 2013. "A new Pearson-type QMLE for conditionally heteroskedastic models," MPRA Paper 52344, University Library of Munich, Germany.

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    More about this item

    Keywords

    ARCH-type model; heavy-tailed innovation; LAD estimator; model diagnostics; sign-based portmanteau test;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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