Application of the Generalized Likelihood Ratio Test for Detecting Changes in the Mean of Multivariate GARCH Processes

Abstract

We derive several multivariate control charts to monitor the mean vector of multi-variate GARCH processes under the presence of changes, by means of maximizing the generalized likelihood ratio. This presentation is rounded up by a comparative performance study based on extensive Monte Carlo simulations. An empirical illustration shows how the obtained results can be applied to real data.

Keywords:

• Generalized likelihood ratio test
• Multivariate control charts
• Multivariate GARCH processes
• Statistical process control

Mathematics Subject Classification:

• 62L20
• 62M10