Niklas Ahlgren, Alexander Back, Timo Teräsvirta
arXiv 30 Jun 2025 · Econometrics
arXiv:2506.23821 · PDF · DOI · OpenAlex · Extracted main text
We develop misspecification tests for building additive time-varying (ATV-)GARCH models. In the model, the volatility equation of the GARCH model is augmented by a deterministic time-varying intercept modeled as a linear combination of logistic transition functions. The intercept is specified by a sequence of tests, moving from specific to general. The first test is the test of the standard stationary GARCH model against an ATV-GARCH model with one transition. The alternative model is unidentified under the null hypothesis, which makes the usual LM test invalid. To overcome this problem, we use the standard method of approximating the transition function by a Taylor expansion around the null hypothesis. Testing proceeds until the first non-rejection. We investigate the small-sample properties of the tests in a comprehensive simulation study. An application to the VIX index indicates that the volatility of the index is not constant over time but begins a slow increase around the 2007-2008 financial crisis.
appendix boundary found by appendix_titled_section at “Appendix” · 76% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Amado, Cristina, Teräsvirta, Timo (2017) Specification and Testing of Multiplicative Time-Varying GARCH Models with Applications self | 0.874 | 5 | 2 | 100% |
| 2 | Engle, Robert F (1982) Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation | 0.737 | 3 | 3 | 67% |
| 3 | Amado, Cristina, Teräsvirta, Timo (2013) Modelling volatility by variance decomposition self | 0.737 | 3 | 2 | 100% |
| 4 | Bollerslev, Tim (1986) Generalized Autoregressive Conditional Heteroskedasticity | 0.644 | 2 | 2 | 100% |
| 5 | Feng, Yanhua (2004) Simultaneously modeling conditional heteroskedasticity and scale change | 0.644 | 2 | 2 | 100% |
| 6 | Truquet, Lionel (2017) Parameter stability and semiparametric inference in time varying auto-regressive conditional heteroscedasticity models | 0.644 | 2 | 2 | 100% |
| 7 | Subba Rao, Suhasini (2006) On Some Nonstationary, Nonlinear Random Processes and Their Stationary Approximations | 0.644 | 2 | 2 | 100% |
| 8 | Engle, Robert F., Ng, Victor K (1993) Measuring and Testing the Impact of News on Volatility | 0.511 | 2 | 2 | 50% |
| 9 | Ghalanos, Alexios, Theussl, Stefan (2015) Rsolnp: General Non-linear Optimization Using Augmented Lagrange Multiplier Method | 0.511 | 2 | 2 | 50% |
| 10 | Ye, Yinyu (1987) Interior Algorithms for Linear, Quadratic, and Linearly Constrained Non-Linear Programming | 0.511 | 2 | 2 | 50% |
Showing the top 10 of 40 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | A new GARCH model with a deterministic time-varying intercept | 0.405 | 1 | 1 |