Distributional Tests in Multivariate Dynamic Models with Normal and Student t Innovations
42 Pages Posted: 1 Apr 2009 Last revised: 18 Jun 2010
Date Written: June 15, 2010
We derive Lagrange Multiplier and Likelihood Ratio specification tests for the null hypotheses of multivariate normal and Student t innovations using the Generalised Hyperbolic distribution as our alternative hypothesis. We decompose the corresponding Lagrange Multiplier-type tests into skewness and kurtosis components. We also obtain more powerful one-sided Kuhn-Tucker versions that are equivalent to the Likelihood Ratio test, whose asymptotic distribution we provide. Finally, we conduct detailed Monte Carlo exercises to study the size and power properties of our proposed tests in finite samples.
Keywords: Bootstrap, Inequality Constraints, Kurtosis, Normality Tests, Skewness, Supremum Test, Underidentified parameters
JEL Classification: C12, C52, C32
Suggested Citation: Suggested Citation