Consistent Variable Selection for GARCH-X Models
Fuente:
arXiv
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| Auteurs principaux: | , |
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| Format: | Preprint |
| Publié: |
2026
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| _version_ | 1866913069987266560 |
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| author | Zambom, Adriano Zanin Saunders, Beck |
| author_facet | Zambom, Adriano Zanin Saunders, Beck |
| contents | In this paper we develop a consistent variable selection procedure for GARCH-X models that identifies the truly relevant exogenous covariates influencing volatility dynamics. The proposed method is based on a multiple hypothesis testing framework with Wald-type test statistics and the Benjamini-Yekutieli False Discovery Rate (FDR) procedure to control the proportion of false discoveries. We establish the consistency of the selection rule, showing that it asymptotically recovers the correct set of covariates as the sample size increases. Monte Carlo simulations across different distributions and dependence structures validate the method's accuracy and robustness. The procedure is applied to modeling the volatility of the SP 500 using macroeconomic and commodity indicators. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2604_25894 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Consistent Variable Selection for GARCH-X Models Zambom, Adriano Zanin Saunders, Beck Methodology In this paper we develop a consistent variable selection procedure for GARCH-X models that identifies the truly relevant exogenous covariates influencing volatility dynamics. The proposed method is based on a multiple hypothesis testing framework with Wald-type test statistics and the Benjamini-Yekutieli False Discovery Rate (FDR) procedure to control the proportion of false discoveries. We establish the consistency of the selection rule, showing that it asymptotically recovers the correct set of covariates as the sample size increases. Monte Carlo simulations across different distributions and dependence structures validate the method's accuracy and robustness. The procedure is applied to modeling the volatility of the SP 500 using macroeconomic and commodity indicators. |
| title | Consistent Variable Selection for GARCH-X Models |
| topic | Methodology |
| url | https://arxiv.org/abs/2604.25894 |