Falsifying ARCH/GARCH Models using Bispectral Based Tests

Abstract

This paper shows that the Hinich (1982) bispectrum test for gaussianity and the Hinich and Rothman (1998) test for time reversibility can be used to falsify the null hypothesis that an autoregressive conditionally heteroskedastic model (ARCH) of its generalization (GARCH) generates nonlinear behavior in the variance of an observed time series. The term… (More)

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