On the test of the volatility proxy model. Issue 12 (1st December 2022)

• Record Type: Journal Article
• Authors: Deng, Chunliang; Zhang, Xingfa; Li, Yuan; Song, Zefang
• Is Part Of: Communications in statistics. Volume 51:Issue 12(2022)
• Page Start: 7390
• Page End: 7403
• Publication Date: 2022-12-01
• Subjects: GARCH effect test -- GARCH model -- Volatility proxy; 62H15 -- 62G20; Mathematical statistics -- Periodicals; Mathematical statistics -- Data processing -- Periodicals; Digital computer simulation -- Periodicals; 519.5
• DOI: 10.1080/03610918.2020.1836215
• Languages: English
• ISSNs: 0361-0918

Abstract

Abstract: Three common tests (Lagrange multiplier test, Likelihood ratio test and Wald test) are considered to test the GARCH effect of the volatility proxy model, proposed by Visser in 2011. Under reasonable assumptions, asymptotic distribution of the three test statistics and their asymptotic equivalence are established. The impact of different proxies to the test performance is also discussed. Numerous simulation studies are carried out to assess the performance of the three tests under different volatility proxies. An empirical study is given to show a potential application of the proposed tests.