A nonlinear moving average test as a robust test for ARCH
نویسندگان
چکیده
The possibility of using a nonlinear moving average (NMA) test as a test for ARCH is considered. A joint test of ARCH and NMA tests is derived. The asymptotic relative efficiency of the NMA test against ARCH is also computed, and is found to be equal to zero. The small sample properties of the tests are examined by some simulation experiments, along with the effects of additive outliers. Overall, both tests’ powers are low in small samples. The NMA test has even less power compared to the ARCH test, but it is more robust to outliers. In addition, often only one of the tests detects ARCH, whereas the other does not. An example is given (interest rate data, 75 observations), where due to an outlier the ARCH test can not detect ARCH, whereas the NMA test can.
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