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Article
Adaptive Testing in ARCH Models
Econometric Reviews (2000)
  • Douglas G Steigerwald, University of California, Santa Barbara
  • Oliver Linton
Abstract
Specification tests for conditional heteroskedasticity that are derived under the assumption that the density of the innovation is Gaussian may not be powerful in light of the recent empirical results that the density is not Gaussian. We obtain specification tests for conditional heteroskedasticity under the assumption that the innovation density is a member of a general family of densities. Our test statistics maximize asymptotic local power and weighted average power criteria for the general family of densities. We establish both first-order and second-order theory for our procedures. Simulations indicate that asymptotic power gains are achievable in finite samples.
Keywords
  • adaptive testing,
  • ARCH,
  • conditional heteroskedasticity,
  • semiparametric
Publication Date
2000
Citation Information
Douglas G Steigerwald and Oliver Linton. "Adaptive Testing in ARCH Models" Econometric Reviews Vol. 19 Iss. 2 (2000)
Available at: http://works.bepress.com/douglas_steigerwald/8/