Identification through Heteroskedasticity in One Lemma: Partial Identification, an Eigenvalue Construction, and a Caution on Rank Tests

George Milunovich

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arXiv · 2610.41361

Identification through Heteroskedasticity in One Lemma: Partial Identification, an Eigenvalue Construction, and a Caution on Rank Tests

George Milunovich

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Abstract

This teaching note unifies known results on identification through heteroskedasticity, under volatility regimes, GARCH, stochastic volatility and covariate-driven variances, in one lemma with a short linear-algebra proof. A shock is identified up to sign and labelling if and only if no other shock shares its variance path, and shocks that share a path are identified up to a rotation. The rows of the structural coefficient matrix solve one generalised eigenvalue problem that nests Rigobon's (2003) two-regime solution. Rank tests on second moments of the errors count at most linearly independent centred variance paths, not identified shocks. A simulation illustrates each point.

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George Milunovich. 2026-10-30. Identification through Heteroskedasticity in One Lemma: Partial Identification, an Eigenvalue Construction, and a Caution on Rank Tests. https://arxiv.org/abs/2610.41361

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