22 Fevrier 2016 - Séminaire Interne - Bilel Sanhaji - Test of the constancy of conditional correlations of unknown functional form in multivariate GARCH models

Date de publication : 27 févr. 2016 23:41:37

We introduce two multivariate constant conditional correlation tests that require little knowledge of the functional relationship determining the conditional correlations. The first test is based on artificial neural networks and the second one is based on a Taylor expansion of each unknown conditional correlation. These new tests can be seen as general misspecification tests of a large set of multivariate GARCH-type models. We investigate the size and the power of these tests through Monte Carlo experiments. Moreover, we study their robustness to non-normality by simulating some models such as the GARCH - t and Beta - t - EGARCH models. We give some illustrative empirical examples based on financial data.