Thiele-CREATES Seminar: Mark Podolskij, University of Heidelberg and CREATES
Title: A test for the rank of the volatility process: the random perturbation approach
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Ny Munkegade 116, 8000 Aarhus C, Building 1531, Aud. D3
Abstract:
In this paper we present a test for the maximal rank of the matrix-valued volatility process in the continuous Ito semimartingale framework. Our idea is based upon a random perturbation of the original high frequency observations of an Ito semimartingale, which opens the way for rank testing. We develop the complete limit theory for the test statistic and apply it to various null and alternative hypotheses. Finally, we demonstrate a homoscedasticity test for the rank process.
Joint work with Jean Jacod.