TSECCTEST (Tse test for CC)

[TomDoan]

Attached is a procedure version of the Tse LM test for CC in multivariate GARCH models: Tse, Y.K.(2000), "A Test for Constant Correlations in a Multivariate GARCH Model", Journal of Econometrics 98, 107-127. This tests the adequacy of a CC representation for the covariances in a GARCH model.

tsecctest.src

Procedure file

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Use the procedure following the estimation of a CC model by GARCH. Note that the GARCH model cannot use off-diagonal covariances in either the mean or variance models. The use of variances is OK, so you can have an "M" model which uses variances, but not the covariances. In estimating the original model, you need to save the following (which are required inputs into this procedure):

1. The residuals. Save with the RVECTOR option on GARCH; input using the RVECTOR option on the procedure.

2. The covariance matrices. Save with the HMAT option on GARCH; input using the HMAT option on the procedure.

3. The derivatives of the log likelihood elements with respect to the parameters. Save with the DERIVES option on GARCH; input using the DERIVES option on the procedure.

For the example from the original Tse article, see http://www.estima.com/forum/viewtopic.php?f=8&t=1537.