Dovonon, Prosper, Taamouti, Abderrahim 
ORCID: 0000-0002-1360-8803 and Williams, Julian
(2022)
Testing the eigenvalue structure of spot and integrated covariance?
JOURNAL OF ECONOMETRICS, 229 (2).
pp. 363-395.
|
Text
AcceptedVersion.pdf - Author Accepted Manuscript Download (2MB) | Preview |
Abstract
For vector Itô semimartingale dynamics, we derive the asymptotic distributions of likelihood-ratio-type test statistics for the purpose of identifying the eigenvalue structure of both integrated and spot covariance matrices estimated using high-frequency data. Unlike the existing approaches where the cross-section dimension grows to infinity, our tests do not necessarily require large cross-section and thus allow for a wide range of applications. The tests, however, are based on non-standard asymptotic distributions with many nuisance parameters. Another contribution of this paper consists in proposing a bootstrap method to approximate these asymptotic distributions. While standard bootstrap methods focus on sampling point-wise returns, the proposed method replicates features of the asymptotic approximation of the statistics of interest that guarantee its validity. A Monte Carlo simulation study shows that the bootstrap-based test controls size and has power for even moderate size samples.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | Bootstrap, Eigenvalue, Eigenvector, High frequency, It? semimartingale, Likelihood ratio test, Principal components |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 12 Dec 2022 09:55 |
| Last Modified: | 28 Oct 2023 21:53 |
| DOI: | 10.1016/j.jeconom.2021.02.006 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3166593 |
Dimensions
Dimensions
