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

Eunju Hwang, Dong Wan Shin

Research output: Contribution to journalArticlepeer-review

7 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 languageEnglish
Pages (from-to)167-176
Number of pages10
JournalStatistics and Probability Letters
Volume99
DOIs
StatePublished - 1 Apr 2015

Keywords

  • HAR model
  • Long-memory
  • Parameter constancy
  • Realized volatility
  • Structural break

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