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Compare unrestricted and restricted VARX-DCC model
Posted: Tue Oct 24, 2017 12:28 pm
by mengqi
Hi Tom,
I have bivariate VAR-DCC model with some exogenous variables in the conditional mean equations. How do I run a F-test, to see whether a restricted version of the model is preferable?
kind regards
Re: Compare unrestricted and restricted VARX-DCC model
Posted: Tue Oct 24, 2017 1:03 pm
by TomDoan
Probably the simplest thing would be to do a likelihood ratio test. To do a Wald test, use the Statistics--Regression Tests, pick Exclusion Restrictions and select the exogenous variables in the scrolling list.
Re: Compare unrestricted and restricted VARX-DCC model
Posted: Tue Jun 25, 2019 4:18 pm
by Esteban
Hi Tom,
One doubt about what you answered. The thing is that the GARCH instruction doesn't define the variable %logdet (Log determinant), so what should we do in order to calculate the loglikelihood ratio?. By first calculating the determinant of the H matrices?. Or we just simply use the %logdet of the VAR as a good estimation of the average variance matrix Σ.
Thanks for your help.
Re: Compare unrestricted and restricted VARX-DCC model
Posted: Tue Jun 25, 2019 4:23 pm
by TomDoan
Use %LOGL. %LOGDET only has a 1-1 mapping with the log likelihood for VAR's and similar models (with a covariance matrix fixed over time)---it's not defined by GARCH because it has no meaning with a GARCH model.