Reexaminating the Sources of Heteroskedasticity: The Paradigm of Noisy Chaotic Models
Physica A, 2008
Posted: 18 Sep 2008
Date Written: May 2008
Abstract
In this paper, we further analyse the rich dynamic properties of the noisy chaotic model developed by Kyrtsou (International Journal of Bifurcation and Chaos, 2005) considering homoskedastic errors, in the aim to derive information about possible linkages between noisy chaotic dynamics and ARCH effects. With the joint application of the Engle (1982) and McLeod-Li (1983) tests for non-linearity in the second moment, we attempt to show how highly non-linear models can exhibit heteroskedasticity when no heteroskedastic structure is assumed by construction.
Keywords: Heteroskedasticity, noisy chaos, endogenous dynamics, econophysics
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