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A Lagrange multiplier test for causality in variance

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Hafner, Christian [UCL] Herwartz, Helmut []

We adapt the Lagrange multiplier (LM) principle to test for noncausality in variance of financial returns. The new test is compared with a Portmanteau statistic [Cheung, Y.W., Ng, L.K., 1996. A causality in variance test and its application to financial market prices. Journal of Econometrics 72, 33–48.]. A Monte Carlo study reveals superior power of the LM test.

Document type Article de périodique (Journal article)
Publication date 2006
Language Anglais
Journal information "Economics Letters" - Vol. 93, no. 1, p. 137-141 (Octobre 2006)
Peer reviewed yes
Publisher Elsevier BV (Amsterdam, Netherlands)
issn 0165-1765
Publication status Publié
Affiliations UCL - EUEN/CORE - Center for operations research and econometrics
Christian-Albrechts-Universität zu Kiel - Institut für Statistik und Ökonometrie
Keywords Causality testing ; Multivariate volatility
Links
Bibliographic reference Hafner, Christian ; Herwartz, Helmut. A Lagrange multiplier test for causality in variance. In: Economics Letters, Vol. 93, no. 1, p. 137-141 (Octobre 2006)
Permanent URL http://hdl.handle.net/2078.1/23577