Article ID Journal Published Year Pages File Type
1140234 Mathematics and Computers in Simulation 2008 11 Pages PDF
Abstract
A simple test for threshold nonlinearity in either the mean or volatility equation, or both, of a heteroskedastic time series model is proposed. The procedure extends current Bayesian Markov chain Monte Carlo methods and threshold modelling by employing a general double threshold GARCH model that allows for an explosive, non-stationary regime. Posterior credible intervals on model parameters are used to detect and specify threshold nonlinearity in the mean and/or volatility equations. Simulation experiments demonstrate that the method works favorably in identifying model specifications varying in complexity from the conventional GARCH up to the full double-threshold nonlinear GARCH model with an explosive regime, and is robust to over-specification in model orders.
Related Topics
Physical Sciences and Engineering Engineering Control and Systems Engineering
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