Garch diagnosis with portmanteau bicorrelation test an application on the Malaysia’s stock market

Liew, Khim Sen and Hinich, M.J. and Lim, K.P. (2003) Garch diagnosis with portmanteau bicorrelation test an application on the Malaysia’s stock market. Working Paper. EconPapers. (Unpublished)

[img]
Preview
PDF
Garch_diagnosis_with_portmanteau.pdf

Download (15kB) | Preview

Abstract

This study employed the Hinich portmanteau bicorrelation test (Hinich and Patterson, 1995; Hinich, 1996) as a diagnostic tool to determine the adequacy of the GARCH model in describing the returns generating process of Malaysia’s stock market, specifically the Kuala Lumpur Stock Exchange Composite Index (KLSE CI). The bicorrelation results demonstrated that, while GARCH model is commonly applied to financial time series, this model cannot provide an adequate characterization for the underlying process of KLSE CI. Further investigation using the windowed test procedure revealed that this was due to the presence of episodic non-stationarity in the data, which could not be captured by any kind of ARCH or GARCH model, even after modifications to the specifications of the GARCH model. Thus, this study points to the need to continue the search for a parsimonious and congruent model capable of capturing the episodic features presence in the returns series of KLSE CI.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: GARCH, Non-linearity, non-stationarity, data generating process, Bicorrelation, Malaysian stock market, 2003, Universiti Malaysia Sarawak, UNIMAS, universiti, university, Borneo, Malaysia, Sarawak, Kuching, Samarahan, IPTA, education, undergraduate, research
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Depositing User: Karen Kornalius
Date Deposited: 05 Dec 2013 02:36
Last Modified: 10 Sep 2015 07:44
URI: http://ir.unimas.my/id/eprint/202

Actions (For repository members only: login required)

View Item View Item