In this paper we test for (Generalized) AutoRegressive Conditional Heteroskedasticity [(G)ARCH] in daily and weekly … data on 22 exchange rates and 13 stock market indices using the standard Lagrange Multiplier [LM] test for GARCH and a new … result is that we find spurious GARCH in over 50% of the cases. Using Monte Carlo simulations, in which we evaluate our …

The GARCH model and the Stochastic Volatility [SV] model are competing but non-nested models to describe unobserved … volatility in asset returns. We propose a GARCH model with an additional error term, which can capture SV model properties, and … which can be used to test GARCH against SV. We discuss model representation, parameter estimation and a simple test for …