Testing for a Single-Factor Stochastic Volatility in Bivariate Series

Journal of Risk and Financial Management

Masahito Kobayashi¹  Masaru Chiba² 

[1] Faculty of Economics, Yokohama National University, 79-4 Tokiwadai, Yokohama 240-8501, Japan;Faculty of Engineering, Fukui University of Technology, 3-6-1 Gakuen, Fukui 910-8505, Japan;

关键词: stochastic volatility model;    Kalman filter;    Lagrange multiplier test;   

DOI  :  10.3390/jrfm6010031

来源: DOAJ

【 摘 要 】

This paper proposes the Lagrange multiplier test for the null hypothesis thatthe bivariate time series has only a single common stochastic volatility factor and noidiosyncratic volatility factor. The test statistic is derived by representing the model in alinear state-space form under the assumption that the log of squared measurement error isnormally distributed. The empirical size and power of the test are examined in Monte Carloexperiments. We apply the test to the Asian stock market indices.

【 授权许可】

Unknown