Journal of the Korean Data and Information Science Society

The Korean Data and Information Science Society (한국데이터정보과학회)
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Numerical study on Jarque-Bera normality test for innovations of ARMA-GARCH models

  • Lee, Tae-Wook (Department of Information Statistics, Hankuk University of Foreign Studies)
  • Published : 2009.03.31
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Abstract

In this paper, we consider Jarque-Bera (JB) normality test for the innovations of ARMA-GARCH models. In financial applications, JB test based on the residuals are routinely used for the normality of ARMA-GARCH innovations without a justification. However, the validity of JB test should be justified in advance of the actual practice (Lee et al., 2009). Through the simulation study, it is found that the validity of JB test depends on the shape of test statistic. Specifically, when the constant term is involved in ARMA model, a certain type of residual based JB test produces severe size distortions.

Keywords

References

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