Wild-bootstrapped variance-ratio test for autocorrelation in the presence of heteroskedasticity |
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Authors: | Jinook Jeong Byunguk Kang |
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Institution: | 1. School of Economics , Yonsei University , Seoul , 120-749 , Republic of Korea;2. Department of Economics , McGill University , 845 Sherbrooke St. W., Montreal , Quebec , Canada , H3A 2T5 |
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Abstract: | The Breusch–Godfrey LM test is one of the most popular tests for autocorrelation. However, it has been shown that the LM test may be erroneous when there exist heteroskedastic errors in a regression model. Recently, remedies have been proposed by Godfrey and Tremayne 9] and Shim et al. 21]. This paper suggests three wild-bootstrapped variance-ratio (WB-VR) tests for autocorrelation in the presence of heteroskedasticity. We show through a Monte Carlo simulation that our WB-VR tests have better small sample properties and are robust to the structure of heteroskedasticity. |
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Keywords: | variance-ratio test Breusch–Godfrey LM test autocorrelation heteroskedasticity wild bootstrap |
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