Journal
ECONOMICS LETTERS
Volume 93, Issue 1, Pages 137-141Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.econlet.2006.04.008
Keywords
causality testing; multivariate volatility
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We adapt the Lagrange multiplier (LM) principle to test for noncausality in variance of financial returns. The new test is compared with a Portmanteau statistic [Cheung, Y.W., Ng, L.K., 1996. A causality in variance test and its application to financial market prices. Journal of Econometrics 72, 33-48]. A Monte Carlo study reveals superior power of the LM test. (c) 2006 Elsevier B.V All rights reserved.
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