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Testing the Box-Cox Parameter for an Integrated Process


Huang, Jian y Kobayashi, Masahito y McAleer, Michael (2011) Testing the Box-Cox Parameter for an Integrated Process. [ Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 19, 2011, ] (No publicado)

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This paper analyses the constant elasticity of volatility (CEV) model suggested by Chan et al. (1992). The CEV model without mean reversion is shown to be the inverse Box-Cox transformation of integrated processes asymptotically. It is demonstrated that the maximum likelihood estimator of the power parameter has a nonstandard asymptotic distribution, which is expressed as an integral of Brownian motions, when the data generating process is not mean reverting. However, it is shown that the t-ratio follows a standard normal distribution asymptotically, so that the use of the conventional t-test in analyzing the power parameter of the CEV model is justified even if there is no mean reversion, as is often the case in empirical research. The model may applied to ultra high frequency data.

Tipo de documento:Documento de trabajo o Informe técnico
Palabras clave:Box-Cox transformation, Brownian Motion, Constant Elasticity of Volatility, Mean Reversion, Nonstandard distribution.
Materias:Ciencias Sociales > Economía > Econometría
Título de serie o colección:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Código ID:12815

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Depositado:02 Jun 2011 14:20
Última Modificación:14 Mar 2014 09:41

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