Title: Testing shock induced asymmetries under unknown form of conditional heteroskedastisity
Authors: Nazarii Salish - BGSE and University of Cologne (Germany) [presenting]
Abstract: A Lagrange multiplier test statistic is developed, and its variants to test for the null hypothesis of no asymmetric effects of shocks on time series are analyzed. In asymmetric time series models that allow for different responses to positive and negative past shocks the likelihood functions are, in general, non-differentiable. By making use of the theory of generalized functions Lagrange multiplier type tests and the resulting asymptotics are derived. The test statistics possess standard asymptotic limiting behavior under the null hypothesis. Monte Carlo experiments illustrate the accuracy of the asymptotic approximation and show that conventional model selection criteria can be used to estimate the required lag length. We provide an empirical application to the U.S. unemployment rate.