Hostname: page-component-78c5997874-m6dg7 Total loading time: 0 Render date: 2024-11-18T01:30:52.621Z Has data issue: false hasContentIssue false
  • English
  • Français

IMPROVED AND EXTENDED END-OF-SAMPLE INSTABILITY TESTS USING A FEASIBLE QUASI-GENERALIZED LEAST SQUARES PROCEDURE

Published online by Cambridge University Press:  04 November 2009

Dukpa Kim
Dukpa Kim*
Affiliation:
University of Virginia
*
*Address correspondence to Dukpa Kim, Department of Economics, University of Virginia, Monroe Hall, McCormick Road, Charlottesville, VA 22903, USA; e-mail: dukpa@virginia.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper extends the Andrews (2002, Econometrica 71, 1661–1694) and Andrews and Kim (2006, Journal of Business & Economic Statistics 24, 379–394) ordinary least squares–based end-of-sample instability tests for linear regression models. The author proposes to quasi-difference the data first using a consistent estimate of the sum of the autoregressive coefficients of the error process and then test for the end-of-sample instability. For the cointegration model, the feasible quasi-generalized least squares (FQGLS) version of the Andrews and Kim (2006) P test is considered and is shown, by simulations, to be more robust to serial correlation in the error process and to have power no less than Andrews and Kim’s original test. For the linear time trend model, the FQGLS version of the Andrews (2002) S test is considered with the error process allowed to be nonstationary up to one unit root, and the new test is shown to be robust to potentially nonstationary serial correlation. A simulation study also shows that the finite-sample properties of the proposed test can be further improved when the Andrews (1993, Econometrica 61,139–165) or Andrews and Chen (1994, Journal of Business & Economic Statistics 12, 187–204) median unbiased estimate of the sum of the autoregressive coefficients is used.

Type
ARTICLES
Information
Econometric Theory , Volume 26 , Issue 4 , August 2010 , pp. 994 - 1031
Copyright
Copyright © Cambridge University Press 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Andrews, D.W.K. (1993) Exactly median-unbiased estimator of first order autoregressive/unit root models. Econometrica 61, 139–165.CrossRefGoogle Scholar
Andrews, D.W.K. (2002) End-of-sample instability tests. Econometrica 71, 1661–1694.CrossRefGoogle Scholar
Andrews, D.W.K. & Chen, H.Y. (1994) Approximately median-unbiased estimation of autoregressive models. Journal of Business & Economic Statistics 12, 187–204.CrossRefGoogle Scholar
Andrews, D.W.K. & Kim, J. (2006) Tests for cointegration breakdown over a short time period. Journal of Business & Economic Statistics 24, 379–394.CrossRefGoogle Scholar
Canjels, E. & Watson, M.W. (1997) Estimating deterministic trends in the presence of serial correlated errors. Review of Economics and Statistics 79, 184–200.CrossRefGoogle Scholar
Ng, S. & Perron, P. (2001) Lag length selection and the construction of unit root tests with good size and power. Econometrica 69, 1519–1554.CrossRefGoogle Scholar
Perron, P. (2006) Dealing with structural breaks. In Patterson, K. & Mills, T.C. (eds.), Palgrave Handbook of Econometrics, vol. 1: Econometric Theory, pp. 278–352. Palgrave Macmillan.Google Scholar
Perron, P. & Yabu, T. (2009) Testing for shifts in trend with an integrated or stationary noise component. Journal of Business & Economic Statistics 27, 369–396.CrossRefGoogle Scholar