The effect of the GARCH(1,1) on autocorrelation tests in dynamic systems of equations

Panagiotis Mantalos, Ghazi Shukur

Research output: Contribution to journalArticlepeer-review

6 Citations (SciVal)

Abstract

Using Monte Carlo methods, the properties of systemwise generalizations of the Breusch Godfrey test for autocorrelated errors are studied when there are some kinds of GARCH effects among the errors. The analysis, regarding the size of the test, reveals that the GARCH have considerable effects of the properties of the test regarding the size, especially in large systems of equations. The corrected LR tests, however, have been shown to perform satisfactorily in small systems when the errors are white noise or they have low GARCH effects, whilst the commonly used TR2 test behaves badly even in single equations. All tests perform badly, however, when the number of equations increases and the GARCH effect is strong. As regards the power of the test, the GARCH was not found to have any significant effects on the power properties of the test.
Original languageEnglish
Pages (from-to)1907-1913
JournalApplied Economics
Volume37
Issue number16
DOIs
Publication statusPublished - 2005

Subject classification (UKÄ)

  • Business Administration

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