Abstract
For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.
Original language | English |
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Pages (from-to) | 167-176 |
Number of pages | 10 |
Journal | Statistics and Probability Letters |
Volume | 99 |
DOIs | |
State | Published - 1 Apr 2015 |
Keywords
- HAR model
- Long-memory
- Parameter constancy
- Realized volatility
- Structural break