TY - UNPB
T1 - A Parsimonious Test of Constancy of a Positive Definite Correlation Matrix in a Multivariate Time-varying GARCH
AU - Kang, Jian
AU - Jakobsen, Johan Stax
AU - Silvennoinen, Annastiina
AU - Teräsvirta, Timo
PY - 2022/1
Y1 - 2022/1
N2 - We construct a parsimonious test of constancy of the correlation matrix in the multivariate conditional correlation GARCH model, where the GARCH equations are time-varying. The alternative to constancy is that the correlations change deterministically as a function of time. The alternative is a covariance matrix, not a correlation matrix, so the test may be viewed as a general test of stability of a constant correlation matrix. The size of the test in finite samples is studied by simulation. An empirical example is given.
AB - We construct a parsimonious test of constancy of the correlation matrix in the multivariate conditional correlation GARCH model, where the GARCH equations are time-varying. The alternative to constancy is that the correlations change deterministically as a function of time. The alternative is a covariance matrix, not a correlation matrix, so the test may be viewed as a general test of stability of a constant correlation matrix. The size of the test in finite samples is studied by simulation. An empirical example is given.
KW - Deterministically varying correlation
KW - Multiplicative time-varying GARCH
KW - Multivariate GARCH
KW - Nonstationary volatility
KW - Smooth transition GARCH
KW - Deterministically varying correlation
KW - Multiplicative time-varying GARCH
KW - Multivariate GARCH
KW - Nonstationary volatility
KW - Smooth transition GARCH
M3 - Working paper
T3 - Creates Research Paper
BT - A Parsimonious Test of Constancy of a Positive Definite Correlation Matrix in a Multivariate Time-varying GARCH
PB - Aarhus Universitet
CY - Aarhus
ER -