Information matrix test, parameter heterogeneity and arch : A synthesis

We apply the White information matrix (IM) test to the linear regression model with autocorrelated errors. A special case of one component of the test is found to be identical to the Engle Lagrange multiplier (LM) test for autoregressive conditional heteroskedasticity (ARCH). Given Chesher's interpretation of the IM test as a test for parameter heterogeneity, this establishes a connection among the IM test, ARCH and parameter variation. This also enables us to specify conditional heteroskedasticity in a more general and convenient way. Other interesting by-products of our analysis are tests for the variation in conditional and static skewness which we call tests for "heterocliticity".

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