Size Distortions of the Wild Bootstrapped HCCME-Based LM Test for Serial Correlation in the Presence of Asymmetric Conditional Heteroskedasticity

Posted: 29 Jan 2015 Last revised: 9 Apr 2015

See all articles by Klaus Grobys

Klaus Grobys

University of Vaasa; University of Jyväskyla

Date Written: June 6, 2014

Abstract

This paper investigates the size distortions of HCCME-based tests for serial correlation and the wild bootstrapped counterparts in the presence of asymmetric conditional heteroskedasticity. Thereby, asymmetric effects are allowed to enter the residual process of the dynamic regression model in both the GARCH parameterization and the innovation process. Monte Carlo evidence reported in this paper indicates that wild bootstrap versions of the LM test for serial correlation tend to overreject the null hypothesis, but the problem is generally not very serious.

Keywords: Asymmetric heteroskedasticity, Serial correlation, Wild bootstrap, HCCME-based LM test, Simulation

JEL Classification: C15, C32

Suggested Citation

Grobys, Klaus, Size Distortions of the Wild Bootstrapped HCCME-Based LM Test for Serial Correlation in the Presence of Asymmetric Conditional Heteroskedasticity (June 6, 2014). Empirical Economics, Vol. 48, 2015, Available at SSRN: https://ssrn.com/abstract=2552461

Klaus Grobys (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa
Finland

University of Jyväskyla ( email )

Jyväskyla
Finland

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