TY - JOUR
T1 - Fitting a two phase threshold multiplicative error model
AU - Perera, Indeewara
AU - Koul, Hira L.
PY - 2017/4/1
Y1 - 2017/4/1
N2 - The recent literature on financial time series analysis has devoted considerable attention to nonnegative time series, such as financial durations, realized volatility, and squared returns. The class of models, referred to as the multiplicative error models [MEM], is particularly suited to model such nonnegative time series. We develop a lack-of-fit test for fitting a two-phase threshold model for the conditional mean function in an MEM. The proposed testing procedure can also be applied to a class of autoregressive conditional heteroscedastic threshold models. We evaluate the test in a simulation study. The testing procedure is illustrated by using two data examples.
AB - The recent literature on financial time series analysis has devoted considerable attention to nonnegative time series, such as financial durations, realized volatility, and squared returns. The class of models, referred to as the multiplicative error models [MEM], is particularly suited to model such nonnegative time series. We develop a lack-of-fit test for fitting a two-phase threshold model for the conditional mean function in an MEM. The proposed testing procedure can also be applied to a class of autoregressive conditional heteroscedastic threshold models. We evaluate the test in a simulation study. The testing procedure is illustrated by using two data examples.
KW - Kolmogorov-Smirnov
KW - Lack-of-fit test
KW - Martingale transform
UR - http://www.scopus.com/inward/record.url?scp=85014320256&partnerID=8YFLogxK
U2 - 10.1016/j.jeconom.2016.12.002
DO - 10.1016/j.jeconom.2016.12.002
M3 - Article
AN - SCOPUS:85014320256
VL - 197
SP - 348
EP - 367
JO - Journal of Econometrics
JF - Journal of Econometrics
SN - 0304-4076
IS - 2
ER -