Consistent nonparametric specification tests for stochastic volatility models based on the return distribution
Zu, Y. (2015). Consistent nonparametric specification tests for stochastic volatility models based on the return distribution (15/02). London, UK: Department of Economics, City University London.
Abstract
This paper develops nonparametric specification tests for stochastic volatility models by comparing the nonparametically estimated return density and distribution functions with their parametric counterparts. Asymptotic null distributions of the tests are derived and the tests are shown to be consistent. Extensive Monte Carlo experiments are performed to study the finite sample properties of the tests. The tests are applied to an empirical dataset and we find the estimated stochastic volatility model is misspecified.
| Publication Type: | Monograph (Discussion Paper) |
|---|---|
| Additional Information: | Copyright authors 2015 |
| Publisher Keywords: | nonparametric test, stochastic volatility models |
| Subjects: | H Social Sciences > HB Economic Theory |
| Departments: | School of Policy & Global Affairs > Economics > Discussion Paper Series |
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