A Parsimonious Test of Constancy of a Positive Definite Correlation Matrix in a Multivariate Time-varying GARCH

Jian Kang, Johan Stax Jakobsen, Annastiina Silvennoinen, Timo Teräsvirta

Research output: Working paperResearch


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.
Original languageEnglish
Place of PublicationAarhus
PublisherAarhus Universitet
Number of pages48
Publication statusPublished - Jan 2022
SeriesCreates Research Paper


  • Deterministically varying correlation
  • Multiplicative time-varying GARCH
  • Multivariate GARCH
  • Nonstationary volatility
  • Smooth transition GARCH

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