A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model

Eunju Hwang; Dong Wan Shin

doi:10.1016/j.spl.2015.01.013

A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model

Eunju Hwang, Dong Wan Shin

Department of Statistics

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.

Original language	English
Pages (from-to)	167-176
Number of pages	10
Journal	Statistics and Probability Letters
Volume	99
DOIs	https://doi.org/10.1016/j.spl.2015.01.013
State	Published - 1 Apr 2015

Keywords

HAR model
Long-memory
Parameter constancy
Realized volatility
Structural break

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10.1016/j.spl.2015.01.013

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title = "A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model",

abstract = "For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.",

keywords = "HAR model, Long-memory, Parameter constancy, Realized volatility, Structural break",

author = "Eunju Hwang and Shin, {Dong Wan}",

note = "Funding Information: The authors are very grateful for many constructive comments of two anonymous referees which improve the paper considerably. This work is supported by the National Research Foundation of Korea ( NRF-2012-2046157 ) through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology . Publisher Copyright: {\textcopyright} 2015 Elsevier B.V.",

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AU - Hwang, Eunju

AU - Shin, Dong Wan

N1 - Funding Information: The authors are very grateful for many constructive comments of two anonymous referees which improve the paper considerably. This work is supported by the National Research Foundation of Korea ( NRF-2012-2046157 ) through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology . Publisher Copyright: © 2015 Elsevier B.V.

PY - 2015/4/1

Y1 - 2015/4/1

N2 - For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.

AB - For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.

KW - HAR model

KW - Long-memory

KW - Parameter constancy

KW - Realized volatility

KW - Structural break

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SN - 0167-7152

VL - 99

SP - 167

EP - 176

JO - Statistics and Probability Letters

JF - Statistics and Probability Letters

ER -

A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model

Abstract

Keywords

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