Causality-in-variance tests suffer from severe size distortions in the presence of structural breaks in volatility, when such breaks are not taken into account. Pre-testing the series for structural changes in volatility largely remedies the problem.

Causality tests, Structural change, Volatility
Hypothesis Testing (jel C12), Time-Series Models; Dynamic Quantile Regressions (jel C22)
dx.doi.org/10.1016/j.econlet.2005.05.029, hdl.handle.net/1765/11131
Economics Letters
Erasmus Research Institute of Management

van Dijk, D.J.C, Osborn, D.R, & Sensier, M. (2005). Testing for causality in variance in the presence of breaks. Economics Letters, 89(2), 193–199. doi:10.1016/j.econlet.2005.05.029