Tests for Parameter Instability and Structural Change With Unknown Change Point

Andrews, Donald W.K.

doi:10.2307/2951764

Cited by 3,485 publications

(3,293 citation statements)

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“…In principle, this is a rolling Chow (1960) breakpoint test (Andrews 1993). The basic test statistic is an F-value, which is computed as a normalized difference between the constraint residual sum of squares and the unconstraint residual sums of squares of the two sub-samples.…”

Section: Empirical Approachmentioning

confidence: 99%

Sovereign Bond Market Integration: The Euro, Trading Platforms and Financial Crises

Schulz

Wolff

2009

SSRN Journal

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We disentangle different driving factors of sovereign bond market integration by studying yield co-movements of EMU countries, the UK, the US and 16 German states (Länder) since 1992. At a low frequency bond market integration has increased gradually in the course of the last 15 years in EMU countries, as well as the UK, the US and the German Länder. The current financial turmoil has abated low frequency euroarea sovereign bond bond market integration, while it has had little effect on the integration with the US and UK. Bond market integration at a high frequency band remains relatively low until October 2000, when a sharp increase in integration can be observed in all samples. The increase in high frequency integration can be attributed to electronic trading platforms becoming functional. The financial crisis does not effect high frequency integration, as no technology shock occurs.JEL: E42, E44, F33, F37, G15 * Deutsche Bundesbank,

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Section: Empirical Approachmentioning

confidence: 99%

Sovereign Bond Market Integration: The Euro, Trading Platforms and Financial Crises

Schulz

Wolff

2009

SSRN Journal

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“…Most tests for structural breaks in the literature, like the celebrated Chow (1960) tests, and those for unknown or multiple break dates in Andrews (1993), Andrews and Ploberger (1994) and Bai and Perron (1998) are appropriate when the break is relatively long lasting and happens in the middle of a sample. The distribution of the corresponding test statistic is suitably found using asymptotics in which the number of observations before and after the break point go to infinity.…”

Section: Introductionmentioning

confidence: 99%

“…Yet, it is often at the end of a sample that researchers and policy-makers alike are interested in testing for instability. Andrews (2003) proposes a test for structural break which was shown to be particularly useful when the number of post-break observations is small. Monte Carlo results suggest that his test has reasonable size and power even when the number of post break observation is 1.…”

Section: Introductionmentioning

confidence: 99%

“…The extension of the test to panel data, under the assumption of cross sectional independence, is relatively straightforward as shown in Mancini-Griffoli and Pauwels (2006). This extension assumes an alternative hypothesis that all individuals exhibit a break, as in other tests for structural breaks in the panel literature, like in Han and Park (1989) which extends the CUSUM tests, or Emerson andKao (2001, 2002), Bai and Ng (2004) and de Wachter and Tzavalis (2004) which build on Andrews (1993) and Andrews and Ploberger (1994). Yet, this approach does not address the interesting alternative that only some -and not all -individuals are affected by a break.…”

Section: Introductionmentioning

confidence: 99%

“…This paper proposes a test for heterogeneous breaks in panels based on the Andrews's (2003) end of sample stability test. In particular, this paper advances a standardized Z statistic built from Andrews (2003) statistics averaged across individuals.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Stability Tests for Heterogeneous Panel Data

Chan¹,

Mancini-Griffoli²,

Pauwels

2008

SSRN Journal

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Ce papier propose un nouveau test pour détecter des changements structurels en fin d'échantillons dans des panels hétérogènes. Le test se construit sur le travail de Andrews (2003) AbstractThis paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some -and not all -individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.

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Testing the consumption-CAPM in developing equity markets

Cashin

McDermott

1998

Int. J. Fin. Econ.

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The Consumption Capital Asset Pricing Model (C‐CAPM) is tested using data on equity prices in Jordan, Turkey, and Pakistan over the period 1986–1993. The analysis is carried out in two steps. The parameters of agents’ dynamic consumption and investment decisions are first estimated, and then the implied equity market price (based on the model) is compared with the actual evolution of equity prices. The empirical results support the proposition that equity price movements in Jordan, Turkey, and Pakistan are not consistent with the C‐CAPM. In each of these developing equity markets, the variability of equity price indices could not be accounted for by information regarding future dividends alone, and the failure to reject the null hypothesis of no cointegration of the implied and actual equity price series is due to parameter instability. © 1997 John Wiley & Sons, Ltd.

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Tests for Parameter Instability and Structural Change With Unknown Change Point

Cited by 3,485 publications

References 35 publications

Sovereign Bond Market Integration: The Euro, Trading Platforms and Financial Crises

Sovereign Bond Market Integration: The Euro, Trading Platforms and Financial Crises

Stability Tests for Heterogeneous Panel Data

Testing the consumption-CAPM in developing equity markets

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