A joint test for arch and bilinearity in the regression model |
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Authors: | M L Higgins A K Bera |
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Institution: |
a Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI
b Department of Economics, University of Illinois, Champaign, IL |
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Abstract: | In this paper we argue that a simultaneous test for ARCH and bilinearity should be used to test for the possible nonlinearity of the error process in the regression model. We suggest such a joint test statistic. An empirical example shows that the individual tests of ARCH and bilinearity may not be conclusive while a joint test clearly rejects the linearity hypothesis. Our results are also applicable to pure time series models. |
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Keywords: | Additivity ARCH Bilinearity Lagrange Multiplier Test |
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