eprintid: 19006
rev_number: 15
eprint_status: archive
userid: 2744
dir: disk0/00/01/90/06
datestamp: 2015-07-09 08:50:15
lastmod: 2015-11-06 14:51:47
status_changed: 2015-07-09 08:50:15
type: workingPaper
metadata_visibility: show
creators_name: Conrad, Christian
creators_name: Schienle, Melanie 
title: Misspecification Testing in GARCH-MIDAS Models
subjects: ddc-330
divisions: i-181000
keywords: Volatility Component Models, LM test, Long-term Volatility.
abstract: We develop a misspecification test for the multiplicative two-component GARCH-MIDAS model suggested in Engle et al. (2013). In the GARCH-MIDAS model a short-term unit variance GARCH component fluctuates around a smoothly time-varying long-term component which is driven by the dynamics of an explanatory variable. We suggest a Lagrange Multiplier statistic for testing the null hypothesis that the variable has no explanatory power. Hence, under the null hypothesis the long-term component is constant and the GARCH-MIDAS reduces to the simple GARCH model. We derive the asymptotic theory for our test statistic and investigate its finite sample properties by Monte-Carlo simulation. The usefulness of our procedure is illustrated by an empirical application to S&P 500 return data.
date: 2015-07
id_scheme: DOI
id_number: 10.11588/heidok.00019006
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0597
ppn_swb: 451487907
own_urn: urn:nbn:de:bsz:16-heidok-190061
language: eng
bibsort: CONRADCHRIMISSPECIFI201507
full_text_status: public
series: Discussion Paper Series, University of Heidelberg, Department of Economics
volume: 0597
place_of_pub: Heidelberg
pages: 34
citation:   Conrad, Christian ; Schienle, Melanie   (2015) Misspecification Testing in GARCH-MIDAS Models.  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/19006/1/conrad_schienle_2015_dp597.pdf