Testing for Causality in Variance using Multivariate GARCH Models

@inproceedings{Hafner2004TestingFC,
  title={Testing for Causality in Variance using Multivariate GARCH Models},
  author={Christian M. Hafner and Helmut Herwartz},
  year={2004}
}
Tests of causality in variance in multiple time series have been proposed recently, based on residuals of estimated univariate models. Although such tests are applied frequently little is known about their power properties. In this paper we show that a convenient alternative to residual based testing is to specify a multivariate volatility model, such as multivariate GARCH (or BEKK), and construct a Wald test on noncausality in variance. We compare both approaches to testing causality in… CONTINUE READING
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