Feldmann, David Härdle, Wolfgang Karl Hafner, Christian M. Hoffmann, Marc Lepskii, Oleg V. Tsybakov, Alexandre B.
Year of Publication:
SFB 373 Discussion Paper No. 1998,34
Stochastic Volatility (SV) models are widely used in financial applications. To decide whether standard parametric restrictions are justified for a given dataset, a statistical test is required. In this paper, we develop such a test based on the linear state space representation. We provide a simulation study and apply the test to the HFDF96 data set. Our results confirm a linear AR(1) structure for the analyzed stock indices S&P500, Dow Jones Industrial Average and for the exchange rate DEM/USD.