Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
A number of recent papers have employed the BDS test as a general test
for mis-specification for linear and nonlinear models. We show that for
a particular class of conditionally heteroscedastic models, the BDS test
is unable to detect a common mis-specification. Our results also demonstrate
that specific rather than portmanteau diagnostics are required to detect
neglected asymmetry in volatility. However for both classes of tests reasonable
power is only obtained using very large sample sizes.
|
|