Testing heteroscedasticity: are parametric ARCH models appropriate?

Many researchers have used parametric ARCH models to specify the conditiona l variance of financial series. However, the usual tests do not provide any information on the form of the conditional variance. The objective of this paper is to present a test for heteroscedasticity, i.e. to decide whether the use of the parametric model can be justified. The test statistic is bas ed on the distance between a non-parametric and a parametric estimator for the conditional variance. The critical values are calculated using a bootst rap method.