Parametric and Semi‐Parametric Efficient Tests for Parameter Instability. (15th November 2015)

• Record Type: Journal Article
• Authors: Lee, Dong Jin
• Is Part Of: Journal of time series analysis. Volume 37:Number 4(2016:Jul.)
• Page Start: 451
• Page End: 475
• Publication Date: 2015-11-15
• Subjects: Adaptive test -- asymptotic optimal test -- parameter instability -- semi‐parametric power envelope -- structural break; Time-series analysis -- Periodicals; 519.232
• DOI: 10.1111/jtsa.12169
• Languages: English
• ISSNs: 0143-9782

Abstract

Abstract : This article examines asymptotically point optimal tests for parameter instability in realistic circumstances when little information about the unstable parameter process and error distribution is available. We first show that, under a correctly specified error distribution, if the unstable parameter processes converge weakly to a Wiener process, then any asymptotic optimal tests for structural breaks and time‐varying parameters are asymptotically equivalent. Our finding is then extended to a semi‐parametric set‐up in which the error distribution is treated as an unknown infinite‐dimensional nuisance parameter. We find that semi‐parametric tests can be adaptive without further restrictive conditions on the error distribution.