Question

Define the Ljung-Box statistical test. How would you use this test in order to assess the...

Define the Ljung-Box statistical test. How would you use this test in order to assess the
adequacy of a particular model in explaining volatility over time?

Homework Answers

Answer #1

Ljung–Box test is a statistical test of whether any of a group of autocorrelations of a time series are different from zero. Instead of testing randomness at each distinct lag, it tests the "overall" randomness based on a number of lags, and is therefore a portmanteau test.

The Ljung-Box test is known to be robust.

The Ljung-Box test on the ranks of the data provides a suitably robust alternative when the distribution is extremely long-tailed. In particular, the rank Ljung-Box test is highly recommended over the Ljung-Box test for evaluating the adequacy of a particular model in explaining volatility over time

P.S. (please upvote if you find the answer satisfactory)

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