LM test interpretation in VAR - a joint hypotheses test?

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yunqingMa
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Joined: Mon Sep 11, 2017 4:39 pm

LM test interpretation in VAR - a joint hypotheses test?

Postby yunqingMa » Tue Sep 12, 2017 3:56 pm

Hi, there

This question is about how to interpret LM test in VAR.

For example, under VAR with lag 1,
Lags LM-Stat Prob
1 34.73090 0.0043
2 21.76811 0.1508

Oh! auto-correlation in lag 1! So, I rerun VAR with 1 more lag. Then the result of LM test under VAR with 2 lags is
Lags LM-Stat Prob
1 31.37932 0.0120
2 10.62227 0.8322
3 20.56224 0.1960

Now my VAR has autocorrelation or not? According to my knowledge (i dont have much technical knowledge), standard LM test is a joint test. But the way EViews manual states looks like LM test under VAR is not a joint hypotheses test. Which means, in my case, I still suffer auto-correlation at lag 1 under VAR(2), RIGHT?

Say, even I have a VAR(6) system, if the LM test result is:

Lags LM-Stat Prob
1 34.43359 0.0047
2 24.91163 0.0714
3 20.13258 0.2143
4 9.748399 0.8794
5 16.69178 0.4058
6 22.46036 0.1289
7 11.65195 0.7676

I still suffer autocorrelation at lag 1, right?


Thank you!!!

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