Testing for One-Factor Models versus Stochastic Volatility Models



Thus,


n Σ j =1 LX (1 ,Xj/n ) ( g ( fj/n ) g ( Xj/n ))
sup
i LX (1 ,Xi/n)


+ oP (1)


L ( n- 1) rj

1 Σ

n

i=1


n-2{lχjz^-χiiiliε,}M√+∑l(glfs2g.(Xs2)dd

Vn-11,.            . .

j=1=1 1 {x3n-Xinn}


n Σ j=1 LX (1 ,Xj/n ) ( g ( fj/n )   g ( Xj/n ))

inf i LX (1 ,Xi/n )


(29)


Note that the numerator in the lower and upper bounds of the inequality in (29) approaches
zero if and only if
LX (1, a) -Lf(1,a) = 0 (almost surely) for all a A, with A having non-zero
Lebesgue measure, or in the multidimensional case, if
Xs and fs have the same occupation
density, which is indeed ruled out under the alternative hypothesis. Therefore, (1
/m)Zn,m,r
consists of the sum of two nondegenerate random variables which do not cancel out each
other. Thus,
Zn,m,r diverges at rate m with probability approaching one.


Therefore, the statement follows.


A.4 Proof of Corollary 1


It follows directly from Theorem 1, part (i)c.


A.5 Proof of Proposition 1


(a) From equation (12), it follows that, for r1 <r2 < ... < rJ,


m,r1

d(s )

m,r2


. ∕T(s )
dm,rJ


d

-→


MN


0,


2 2 for1 σ4(Xs)ds

2 for1 σ4(Xs)ds

.

.
.

2 for1 σ4(Xs)ds


2f0r1 σ4(Xs)ds ... 2f0r1 σ4(Xs)ds ʌ
2f
0r2 σ4(Xs)ds ... 2f0r2 σ4(Xs)ds

.                       ..                          .

.                                            ..

2 for2 σ 4( Xs )d s ... 2 forJ σ 4( Xs )d s ))


Also, note that

2 2f0r1 σ4(Xs)ds  2f0r1 σ4(Xs)ds  ...  2f0r1 σ4(Xs)ds >

2 f0r1 σ 4( Xs )d s  2 f0r2 σ 4( Xs )d s  ...  2 f0r2 σ 4( Xs )d s

.   ....

.                                                                .                                            ..

κ 2 f0r1 σ 4( Xs )d s 2 f0r2 σ 4( Xs )d s ... 2 J'rJ σ4 ( Xs )d s y

27



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