Specification Testing in Hawkes Models
| Autor: | Francine Gresnigt, Erik Kole, Philip Hans Franses |
|---|---|
| Přispěvatelé: | Econometrics |
| Rok vydání: | 2016 |
| Předmět: |
Economics and Econometrics
Multivariate statistics 050208 finance Conditional dependence jel:C52 05 social sciences Financial market Univariate jel:C12 jel:C32 Hawkes processes specification tests extremal dependence financial crashes jel:C22 symbols.namesake Exchange rate Sample size determination Lagrange multiplier 0502 economics and business Econometrics symbols Volatility (finance) Finance 050205 econometrics Mathematics |
| Zdroj: | Journal of Financial Econometrics, 15(1), 139-171. Oxford University Press |
| ISSN: | 1479-8417 1479-8409 |
| DOI: | 10.1093/jjfinec/nbw011 |
| Popis: | We propose various specification tests for Hawkes models based on the Lagrange Multiplier (LM) principle. Hawkes models can be used to model the occurrence of extreme events in financial markets. Our specific testing focus is on extending a univariate model to a multivariate model, that is, we examine whether there is a conditional dependence between extreme events in markets. Simulations show that the test has good size and power, in particular for sample sizes that are typically encountered in practice. Applying the specification test for dependence to U.S. stocks, bonds, and exchange rate data, we find strong evidence for cross-excitation within segments as well as between segments, which cannot simply be explained by volatility spillovers. Therefore, we recommend that univariate Hawkes models be extended to account for the cross-triggering phenomenon. (JEL: C12, C22, C32, C52) |
| Databáze: | OpenAIRE |
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