We study the problem of testing the error distribution in a multivariate linear regression (MLR) model. The tests are functions of appropriately standardized multivariate least squares residuals whose distribution is invariant to the unknown cross-equation error covariance matrix. Empirical multivariate skewness and kurtosis criteria are then compared with a simulation-based estimate of their expected value under the hypothesized distribution. Special cases considered include testing multivariate normal and stable error distributions. In the Gaussian case, finite-sample versions of the standard multivariate skewness and kurtosis tests are derived. To do this, we exploit simple, double and multi-stage Monte Carlo test methods. For non-Gaussian distribution families involving nuisance parameters, confidence sets are derived for the nuisance parameters and the error distribution. The tests are applied to an asset pricing model with observable risk-free rates, using monthly returns on New York Stock Exchange (NYSE) portfolios over 5-year subperiods from 1926 to 1995.

Oxford Bulletin of Economics and Statistics

Dufour, J.-M. (Jean-Marie), Khalaf, L, & Beaulieu, M.-C. (Marie-Claude). (2003). Exact Skewness-Kurtosis Tests for Multivariate Normality and Goodness-of-Fit in Multivariate Regressions with Application to Asset Pricing Models. In Oxford Bulletin of Economics and Statistics (Vol. 65, pp. 891–906). doi:10.1046/j.0305-9049.2003.00085.x