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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 549:
Testing constancy of the error covariance matrix in vector models

Bruno Eklund () and Timo Teräsvirta ()

Abstract: This paper contains a Lagrange multiplier test of the hypothesis that the covariance matrix of a multivariate time series model is constant over time. It is further assumed that under the alternative, the error variances are time-varying whereas the correlation remain constant over time. Under the parameterized alternative hypothesis the variance may change continuously as a function of time or some observable stochastic variables.

Keywords: error covariance structure; Lagrange multiplier test; model misspecification; Monte Carlo simulation; (follow links to similar papers)

JEL-Codes: C32; C52; (follow links to similar papers)

24 pages, November 28, 2003, Revised January 18, 2006

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This paper is published as:
Eklund, Bruno and Timo Teräsvirta, (2007), 'Testing constancy of the error covariance matrix in vector models', Journal of Econometrics, Vol. 140, pages 753-780

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